SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K
                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
(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, 2001
                                              -----------------
                                       OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

             For the transition period from __________ to __________

                        Commission File Number 000-14879

                               CYTOGEN CORPORATION
             -----------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

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

600 College Road East, CN5308, Princeton New Jersey                 08540-5308
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                            (Zip Code)

Registrant's telephone number, including area code (609) 750-8200
                                                   ------------------------
Securities registered pursuant to Section 12(b)of the Act: None
                                                           ----------------
Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $0.01 par value
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
Yes X    No
    --
Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

The aggregate market value of the  registrant's  voting shares of
Common Stock held by non-affiliates of the registrant on March 1, 2002, based on
$2.27 per share,  the last reported sale price on the NASDAQ  National Market on
that date, was $187 million.

The  number of  shares  of  Common  Stock,  $.01 par  value,  of the  registrant
outstanding as of March 1, 2002 was 82,508,739 shares.

The following  documents are incorporated by reference into the Annual Report on
Form 10-K: Portions of the registrant's  definitive Proxy Statement for its 2002
Annual Meeting of  Stockholders  are  incorporated by reference into Part III of
this Report.

<PAGE>


                                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

            Item                                                                              Page
            ----                                                                              ----
<S>         <C>                                                                                 <C>
PART I      1.   Business....................................................................    1

            2.   Properties..................................................................   36

            3.   Legal Proceedings...........................................................   36

            4.   Submission of Matters to a Vote of Security Holders.........................   37

PART II     5.   Market for the Company's Common Equity and Related Stockholder Matters......   38

            6.   Selected Financial Data.....................................................   39

            7.   Management's Discussion and Analysis of Financial Condition and Results of
                     Operations..............................................................   41

            7A.  Quantitative and Qualitative Disclosures about Market Risk..................   48

            8.   Financial Statements and Supplementary Data.................................   48
            9.   Changes in and Disagreements with Accountants on Accounting and Financial
                     Disclosure..............................................................   48
PART III    10.  Directors and Executive Officers of the Company.............................   49
            11.  Executive Compensation......................................................   49
            12.  Security Ownership of Certain Beneficial Owners and Management and Related
                     Stockholder Matters.....................................................   49
            13.  Certain Relationships and Related Transactions..............................   49
PART IV     14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K............   50
EXHIBIT INDEX................................................................................   50
SIGNATURES...................................................................................   55
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................................   57

</TABLE>
<PAGE>
                                     PART I

Item 1.  Business

Business

Overview

Cytogen is an established  biopharmaceutical company with a growing product line
in prostate cancer and other areas of oncology, along with functional proteomics
solutions and proprietary signal  transduction  pathway  information through its
AxCell Biosciences subsidiary.  We are extending our expertise in antibodies and
molecular   recognition  to  the  development  of  new  products  and  a  signal
transduction-driven  drug discovery platform.  We have established a pipeline of
product  candidates  based upon our  proprietary  antibody  and our  exclusively
licensed prostate specific membrane antigen, or PSMA, technologies.  We are also
engaged in the  research and  development  of novel  biopharmaceutical  products
using our growing portfolio of functional proteomics solutions and collection of
proprietary signal transduction pathway information.

Our  portfolio of prostate  cancer  products and  development  pipeline  reflect
Cytogen's  reputation  for  bringing  novelty and  innovation  to  patients  and
physicians.   FDA-approved   products  include   ProstaScint(R)   (a  monoclonal
antibody-based  imaging  agent used to image the  extent and spread of  prostate
cancer);  BrachySeed(TM)  I-125 and Pd-103 (uniquely  designed,  next-generation
radioactive seed implants for the treatment of localized  prostate cancer);  and
Quadramet(R)  (a  therapeutic  agent  marketed  for the  relief  of bone pain in
prostate and other types of cancer).

In  August  2000,  we expanded our  product  pipeline  by  entering  into
marketing,  license and supply  agreements  with  Advanced  Magnetics,  Inc. for
Combidex(R)  and for Code 7228,  which are  investigational  magnetic  resonance
imaging (MRI) contrast agents. We have exclusive U.S. rights to Combidex for
the detection of lymph node  metastases and exclusive  U.S.  rights to Code 7228
for oncology  applications.  Following a priority review,  Combidex  received an
approvable letter from the U.S. Food and Drug Administration (FDA) in June 2000.
Cytogen and Advanced  Magnetics have  established  project teams to cooperate on
the development of Combidex.

We  have   integrated   our  expertise  in  molecular   and  cellular   biology,
biochemistry,  bioinformatics,  pharmacology and clinical  development to create
two exciting and distinct technologies:

1) PROSTATE SPECIFIC MEMBRANE ANTIGEN

Prostate specific membrane antigen,  or PSMA, is a cell-surface  protein that is
abundantly  expressed  on  prostate  cancer  cells  at all  stages  of  disease,
including advanced or metastatic disease.  The PSMA gene was first discovered by
scientists at Memorial Sloan-Kettering Cancer Center and is exclusively licensed
to  Cytogen.  From  this  technology,  we have  put one  product  on the  market
(ProstaScint)  and built a robust pipeline of products in development,  of which
one should enter Phase I clinical  trials in 2002.  These pipeline  products are
focused primarily on novel vaccine and antibody cancer therapy, initially in the
area of prostsate cancer.

PSMA  is  also  present  at  high  levels  on the  newly  formed  blood  vessels
(neovasculature)  needed  for the  growth  and  survival  of many types of solid
tumors. If PSMA-targeted therapies can destroy or prevent formation of these new
blood  vessels,  the therapies  may prove  valuable in treating a broad range of
cancers.

2) SIGNAL TRANSDUCTION INHIBITORS

Our AxCell Biosciences  subsidiary is engaged in the research and development of
novel  biopharmaceutical  products  using its growing  portfolio  of  functional
proteomics  solutions and collection of proprietary signal transduction  pathway
information.   Through  the   systematic  and   industrialized   measurement  of
protein-to-protein   interactions,   AxCell  is   assembling   ProChart(TM),   a
proprietary database of signal transduction pathway information that is relevant
in a number of therapeutically  important classes of molecules  including growth
factors,  receptors and other potential protein therapeutics or drug targets. In
early 2001,  scientists at AxCell were the first to successfully identify all of
the known  domain/ligand  interactions  in the known WW domain family,  which is
believed to play a role in the onset and  progression of muscular  dystrophy and
Alzheimer's  disease.  Throughout 2001, AxCell identified  approximately half of
the domain/ligand interactions in the known SH3 and PDZ domain families and made
continued  progress in mapping the SH2 domain  family.  AxCell is expanding  and
accelerating  its research  activities  to further  elucidate  the role of novel
proteins and pathways in ProChart,  through  both  external  collaborations  and
internal data mining.


                                      -1-
<PAGE>
AxCell uses its proprietary  technology as a tool to provide  collaborators with
vital information about signal  transduction  pathways that these  collaborators
are  interested in targeting  for drug  discovery.  We provide this  information
rapidly and  efficiently,  using the  proprietary  methods  and systems  that we
developed  to  identify  signal  transduction   inhibitors  as  drugs.  We  have
successfully  leveraged our technology through  collaborations  with Mount Sinai
School of Medicine,  National Cancer  Institute,  Kimmel Cancer Center at Thomas
Jefferson University, and Pluvita Corporation. These collaborations increase our
resources, improve our technological strength and establish valuable development
relationships with commercial opportunities.

Signal  transduction  inhibitors may be marketed as drugs because the inhibitor,
once it binds to the  target  protein,  prevents  the  activation  of a specific
disease-causing  pathway,  resulting in a therapeutic benefit to the patient. We
believe signal transduction inhibitors are also useful as a tool to understand a
protein's function and its value as a drug target. Understanding the function of
a protein helps  prioritize  targets for drug discovery.  AxCell's map of domain
and ligand  interactions is an efficient  technology to convert peptide sequence
information into drugs. In addition,  because signal transduction inhibitors are
designed  to bind  specifically  to a target,  and as a result,  do not  inhibit
unintended protein products, we believe signal transduction inhibitors are safer
and more effective than traditional drugs. By using medicinal chemistry,  we can
design chemical mimetics to our peptide-based  signal  transduction  inhibitors,
which  will  support  methods  of  dosing  drugs  that are more  convenient  for
patients, including methods of oral delivery.

The  Company  was  incorporated  in  Delaware  on March 3,  1980  under the name
Hybridex, Inc. and changed its name to Cytogen Corporation on April 1, 1980. Our
executive  offices are located at 600 College Road East,  Princeton,  New Jersey
08540 and our telephone number is 609-750-8200.

PROSTATE CANCER AND ONCOLOGY

Background

Approximately  one in every  six men will  develop  prostate  cancer.  It is the
second  leading cause of cancer death among men in the United  States,  exceeded
only by lung cancer.  The American Cancer Society  estimates that nearly 200,000
new cases of prostate  cancer will be diagnosed  this year in the U.S., and that
31,500 men will die of the disease.  Fundamentals of the prostate cancer segment
of the oncology market that are particularly encouraging include:

     -    accelerated  approval  procedures  adopted by the FDA to  shorten  the
          development process and review time for cancer drugs;

     -    in-licensing   opportunities   created   by  a   trend   among   large
          pharmaceutical companies to concentrate on products with larger market
          potential than most anticancer drugs;

     -    favorable pricing and reimbursement for oncology drugs; and

     -    a highly concentrated  population of urology healthcare  professionals
          which we believe allows a smaller sales force to be effective.



                                    -2-
<PAGE>


Our marketed oncology products and pipeline are comprised of the following:
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
        Product                  Indication                      Status                 Development/Marketing
        -------                  ----------                      ------                 ---------------------
-----------------------------------------------------------------------------------------------------------------

<S>                      <C>                          <C>                           <C>
ProstaScint              Monoclonal antibody          Approved and marketed in      Cytogen (United States &
                         diagnostic imaging agent     the United States.            Canada)
                         for staging the spread of    Regulatory approval in
                         prostate cancer              Canada
----------------------------------------------------------------------------------------------------------------
BrachySeed(TM)           Treatment of localized       Iodine 125 approved and       Cytogen (United States)
                         tumors such as tumors of     marketed in the United
                         the neck, lung, pancreas,    States
                         breast, uterus and prostate

                                                      Palladium 103 approved  in
                                                      the United States and
                                                      marketing initiated in the
                                                      first half of 2002
----------------------------------------------------------------------------------------------------------------
OncoScint CR/OV          Monoclonal antibody          Approved for sale in eleven   Cytogen (United States and
                         diagnostic imaging agent     European countries, Canada    Canada)
                         for spread of colorectal     and the United States
                         and ovarian cancer
----------------------------------------------------------------------------------------------------------------
Quadramet                Relief of bone pain from     Approved in the United        Berlex (United States);
                         cancer spread to the bone    States and Canada             Cytogen (Canada)
                         from primary tumor
                         ---------------------------------------------------------------------------------------
                         Treatment of primary bone    Phase I results recently      Berlex (United States);
                         tumors.                      published                     Cytogen (Canada)
----------------------------------------------------------------------------------------------------------------
PSMA Development         In vivo immunotherapeutic    Pre-clinical development      Progenics/Cytogen LLC
                         product for cancer vaccine
                         utilizing gene and
                         protein-based therapy        Phase I clinical
                                                      development in 2002
                         ---------------------------------------------------------------------------------------
                         Prostate cancer              Pre-clinical development      Progenics/Cytogen LLC
                         antibody-based therapy
                         ---------------------------------------------------------------------------------------
                         In vitro diagnostic tests    Development of a trial assay  Cytogen to market or with
                         for prostate cancer                                        partner
                         --------------------------------------------------------------------------------------
                         Ex vivo dendritic cell       Phase III clinical trials     Northwest Biotherapeutics,
                         processing                                                 Inc.
----------------------------------------------------------------------------------------------------------------
</TABLE>

Pipeline--PSMA technology

Prostate specific membrane antigen, or PSMA, is a transmembrane protein that can
be used as an important marker  associated with prostate  cancer.  PSMA has also
been found to be present in new blood  vessel  formation  associated  with other
major solid tumors.  It is over expressed in primary prostate cancer,  but it is
expressed most highly in the more aggressive forms of prostate cancer, including
those that do not express prostate specific  antigen,  or PSA, and those that do
not  respond  to  hormone  therapy.   Memorial   Sloan-Kettering  Cancer  Center
identified  PSMA using a monoclonal  antibody  supplied by us. A patent entitled
"Prostate Specific Membrane Antigen" was issued to Sloan-Kettering Institute for
Cancer Research, an affiliate of Memorial  Sloan-Kettering Cancer Center, and we
have the exclusive worldwide license covering this technology. Subsequently, the
antibody for PSMA was the basis of our FDA-approved ProstaScint imaging product.
We believe  that  technology  utilizing  PSMA can yield novel  products  for the
treatment and diagnosis of cancer because of the unique  characteristics of this
antigen.


                                    -3-
<PAGE>
In 1999,  Cytogen  entered into a joint venture with Progenics  Pharmaceuticals,
Inc. ("Progenics") to develop in vivo immunotherapeutic products utilizing PSMA.
The first of these product  candidates is a therapeutic  prostate cancer vaccine
utilizing the PSMA gene and a vector  delivery  system and the PSMA protein as a
basis of immune  stimulation.  We are also  developing  through  this venture an
antibody-based  immunotherapy for prostate cancer. We believe that these product
candidates,  if  successfully  developed,  could play an  important  role in the
treatment of prostate cancer.  We believe there are significant  unmet needs for
treatment and monitoring of this disease. In addition, we intend to evaluate the
utility of these therapies,  as an anti-angiogenesis  approach, in other cancers
where PSMA is expressed in association with tumor  neovasculative  e.g., breast,
colon, etc.

The joint venture is owned equally by Progenics Pharmaceuticals, Inc. and us. We
have  exclusively  licensed  to  the  joint  venture  certain  immunotherapeutic
applications  of our PSMA patent rights and  know-how.  Progenics has funded the
first $3 million of pre-clinical development costs of the program.  Beginning in
December  2001,  we and  Progenics are sharing costs of the program in excess of
the initial $3 million for clinical development.  We have certain North American
marketing  rights to  products  developed  by the  venture  and a right of first
negotiation with respect to marketing  activities in any territory outside North
America. We anticipate marketing any products developed upon approval by the FDA
or  requisite  foreign  regulatory  bodies,  as  applicable.   If  approved,  we
anticipate  marketing  these  products  with  our own  sales  force  and will be
reimbursed  by the joint  venture for these costs.  We will split the net profit
equally with Progenics on any products  developed by the venture.  In connection
with the licensing of the PSMA  technology to the joint venture,  we received $2
million in  payments,  of which $1 million was received  during  1999,  $500,000
during 2000,  and $500,000  during 2001.  We have  exclusively  licensed in vivo
immunotherapy  rights to PSMA to this  joint  venture.  During  2001,  the joint
venture  entered into a worldwide  exclusive  licensing  agreement with AlphaVax
Human Vaccines,  Inc. to use the AlphaVax  Replicon Vector  (ArV(TM))  system to
create a therapeutic  prostate  cancer vaccine  incorporating  the PSMA antigen.
Also in 2001, the joint venture entered into a collaboration with Abgenix,  Inc.
to use  the  company's  XenoMouse(TM)  technology  for  generating  fully  human
antibodies  to PSMA.  As a  result  of such  collaboration,  the  joint  venture
successfully created human monoclonal antibodies that target PSMA.

We  licensed  PSMA  through  our  subsidiary,   Prostagen,  Inc.,  to  Northwest
Biotherapeutics,  Inc.,  for  development  of  in  vitro  dendritic  cell  based
immunotherapy  of  prostate  cancer.  Prostagen  also  licensed  exclusive  PSMA
manufacturing   rights  for  immunotherapy  to  Northwest   Clinicals,   LLC,  a
corporation formed and co-owned by Northwest  Biotherapeutics and Prostagen.  In
2000, we executed a new sublicense agreement with Northwest Biotherapeutics Inc.
clarifying  their  rights  to make  and use  PSMA  for ex vivo  prostate  cancer
immunotherapy.   The  license  agreement  with  Northwest  Clinicals,   LLC  was
terminated and the manufacturing  rights  thereunder  returned to Cytogen except
for those  granted  under the  newly-executed  license  with  respect to ex vivo
immunotherapy.  Last  year we  reported  that  we and  Progenics  had a  dispute
regarding the timely  reacquisition of the PSMA  manufacturing  rights.  We have
reached a mutually  satisfactory  agreement  with Progenics with respect to this
matter.

We obtained  exclusive,  world-wide  licenses from Molecular  Staging,  Inc. for
technology to be used in developing  in vitro  diagnostic  tests using both PSMA
and PSA. Molecular Staging's Rolling Circle Amplification Technology is a novel,
patented  process  that creates new  diagnostic  opportunities.  Rolling  Circle
Amplification  Technology  is a highly  sensitive,  quantitative  and  efficient
amplification  method  that  allows  the user to detect the  presence  of target
molecules in a wide array of testing formats.  It offers a practical method that
allows  solid  phase  recognition  and  detection  of  target  molecules  either
directly,  on a cell or on a biochip.  Our initial  goal is to deploy  Molecular
Staging's  technology in a new diagnostic kit for managing prostate cancer based
on detection of PSA and PSMA. We have  established the proof of concept of using
the RCAT  technology in a PSA serving assay and are  investigating  the optional
contribution  of  reagents  (i.e.  monoclonal  antibody  pairs)  using a similar
approach  for PSMA.  We also plan to deploy such assays for  diagnosis  of other
tumors where PSMA is found in associated neovasculature.

Market potential

Diagnostic Screening Tests

The measurement of prostate specific antigen,  or PSA, levels in the circulation
is the only in vitro test approved for the monitoring of prostate  cancer in the
United States.  The American Cancer Society,  American  College of Radiology and
American  Urologic  Association  have  recommended  PSA for use in  screening of
asymptomatic men, in combination with a digital rectal examination.  However, in
1997, the American College of Physicians concluded that there was no evidence of
benefit  from  routine  screening  using  PSA and  recommended  against  regular
screening  using this test. The American  Urologic  Association,  which supports
screening  tests  for  eligible  men over 50 years of age,  claims  that PSA and
digital  rectal  examination  screening  increases  the  rate  of  early  cancer
diagnosis  from  30% to 40% for  those  not  screened  to 70% to 85%  for  those

                                    -4-
<PAGE>
screened with PSA.  Even though a PSA test  combined with a digital  rectal exam
increases the chances of detection,  the method generates a high number of false
positives  that  often lead to  unnecessary  biopsies.  We believe  new and more
accurate tests based on PSA and PSMA may offer higher specificity and prognostic
information in diagnosing primary and recurrent prostate cancer.

An  estimated  23.8 million PSA tests were  performed in 1998  yielding a market
value of $286 million.  It was expected that this market would reach nearly $400
million in 2001 according to the 1999 Medical Data International Report. Current
estimates of the world-wide  market are $400-600  million with  approximately 60
million men being  screened  for PSA levels in the United  States.  In addition,
over one million biopsies are performed annually in the United States to confirm
the  presence  of  prostate  cancer  following  a  screening.  Furthermore,  the
correlation  of PSA values and prostatic  biopsy results has failed to achieve a
level of predictability which avoids unnecessary biopsies.

A serum  test  for  PSMA,  representing  a novel  marker  associated  with  more
aggressive  disease,  may provide more relevant prognostic value and improve the
accuracy of  evaluating  prostate  cancer.  We anticipate  providing  both tests
together to help gain entrance to this important market.

Immunotherapy/Vaccines

We  are   developing,   as   part   of   our   collaboration   with   Progenics,
immunotherapeutics for treatment of prostate cancer. We believe immunotherapy is
a particularly  attractive  alternative for the treatment of prostate cancer and
for prevention of recurrent disease by eliminating metastases.  Because PSMA has
been identified as a unique antigen linked to prostate and other cancers, it may
serve as an excellent immunotherapy target.

As part of our joint venture with Progenics,  we are developing both vaccine and
antibody-based  immunotherapies directed to PSMA.  Additionally,  antibody-based
applications may also include radio labeled or toxic-conjugated agents.

We believe that there are  approximately  one million men annually in the United
States who are at risk for  recurrent  disease  and/or  have  advanced  prostate
cancer.  We estimate that the potential  market for a vaccine or  antibody-based
treatment is greater than $500 million annually in the United States.

Our approved products

We have four  marketed  products,  each of which has been  approved  by the FDA:
ProstaScint,  used as an imaging agent in the diagnosis of the extent and spread
of prostate cancer;  BrachySeed,  a second  generation  radioactive  implant for
prostate cancer therapy; OncoScint CR/OV, marketed as a diagnostic imaging agent
for colorectal and ovarian cancer;  and Quadramet,  used for relief of bone pain
from cancer that has spread to the bone from the primary tumor.

Cancer diagnostic imaging products

Our  cancer   diagnostic   products,   ProstaScint  and  OncoScint   CR/OV,  are
murine-based monoclonal  antibody-based imaging agents for prostate,  colorectal
and ovarian cancers.  These products utilize our proprietary  targeted  delivery
system,  employing whole monoclonal  antibodies,  which directs the radioisotope
Indium/111/  to  malignant  tumor sites.  A  radioisotope  is an element  which,
because of nuclear instability, undergoes radioactive decay and emits radiation.
The imaging products are supplied to hospitals,  diagnostic  imaging centers and
radiopharmacies.

During an imaging  procedure,  the radiolabeled  monoclonal  antibody product is
administered  intravenously  into the patient.  The antibody travels through the
bloodstream  and  binds to  specific  antigens  expressed  by the  tumors  being
studied.  The  radioactivity  from the  isotope  that has been  attached  to the
antibody can be detected from outside the body by a gamma camera.  Gamma cameras
are universally found in all nuclear medicine departments. The image captured by
the camera  identifies  the existence,  location and extent of the  radiolabeled
pharmaceutical  thus  identifying the sites of tumor.  Based on clinical studies
conducted to date by  physicians on our behalf,  the imaging  agents may provide
new and  useful  information  not  available  from other  diagnostic  modalities
regarding the existence,  location and extent of a specific  disease  throughout
the body. We believe that this  information  has the potential to affect the way
physicians manage their patients' individual treatments.

ProstaScint

ProstaScint is a diagnostic  monoclonal  antibody  linked to  Indium/111/  which
specifically  targets  PSMA.  Due to  the  selective  expression  of  PSMA,  the
ProstaScint  imaging  procedure  can detect  the  extent and spread of  prostate
cancer in the body.  ProstaScint  is  approved by the FDA for  marketing  in two
clinical  settings:  as a diagnostic  imaging agent in newly diagnosed  patients
                                    -5-
<PAGE>
with  biopsy-proven  prostate  cancer thought to be clinically  localized  after
standard  diagnostic  evaluation  and who are at high  risk for  spread of their
disease to pelvic lymph nodes and for use in post-prostatectomy patients in whom
there is a high suspicion that the cancer has recurred.

According to the  American  Cancer  Society,  nearly  200,000  American men were
diagnosed with prostate  cancer in 2000, of whom  approximately  11% are at high
risk for metastatic  spread of their disease.  In addition,  estimates  indicate
that in 2000, 40,000 to 60,000 patients  previously  treated for prostate cancer
developed symptoms of recurrent cancer which had not yet progressed to the point
of  skeletal  involvement.  We believe  that there are  approximately  60,000 to
70,000  patients with prostate  cancer in the United States who are  candidates,
based on current indications, to receive a ProstaScint scan each year.

When  deciding on an initial  course of therapy for diagnosed  prostate  cancer,
physicians  must first  determine  the extent of  disease  in the  patient.  The
accuracy of this information is vital in deciding upon an appropriate  course of
therapy.  Prior to the  availability of ProstaScint,  determining  whether newly
diagnosed disease was limited to the prostate or had spread beyond the gland was
based upon statistical inference from the biopsy appearance of the tumor and the
patient's serum level of PSA. Conventional imaging methods such as CT or MRI are
all relatively insensitive because they rely on identifying  significant changes
to  normal  anatomic  structure  to  indicate  the  presence  of  disease.   The
ProstaScint  disease scan images are based upon  expression of the PSMA molecule
and,  therefore,  can identify disease not readily  detectable with conventional
procedures.

In the United States,  following  initial therapy,  prostate cancer patients are
monitored to ascertain  changes in the level of PSA. In this setting,  a rise in
PSA is evidence of recurrence of the patient's prostate cancer. Knowledge of the
extent and  location of disease  recurrence  is  important  in choosing the most
appropriate form of treatment. The National Comprehensive Cancer Network (NCCN),
a consortium of leading cancer  hospitals,  in 2000 included  ProstaScint in its
Practice Guidelines for Prostate Cancer. These guidelines are published to serve
as the practice standard for the oncology community.

We also  believe  that  ProstaScint  may be useful  for  imaging  the  extent of
prostate  cancer within the prostate  gland.  ProstaScint  guided therapy may be
useful to help guide  specific  treatments  such as  prostate  brachytherapy  or
highly  targeted  external beam  radiation.  Brachytherapy  is a treatment which
implants  radiation  sources  into the site of the tumor;  while  external  beam
radiation  utilizes a beam of  radiation  directed  at the cancer  from a source
outside  the  body.  We  estimate  that  approximately  half of newly  diagnosed
prostate cancer patients will undergo a form of radiation treatment. The current
generation of imaging  technologies enables physicians to view ProstaScint scans
incorporated with conventional imaging modalities. We believe these technologies
will  create  greater  acceptance  of  ProstaScint.  We are unaware of any other
agents approved for the imaging and diagnosis of prostate cancer.

OncoScint CR/OV

OncoScint  CR/OV is approved by the FDA for sale in the United States with other
appropriate,  commercially  available  diagnostic tests, to locate  malignancies
outside the liver in patients with known colorectal or ovarian cancer. OncoScint
CR/OV is also  approved  for  sale in  eleven  European  countries  and  Canada.
However,  this product has not received wide market acceptance by physicians for
patients with these  conditions.  We market OncoScint CR/OV in the United States
directly  through  our own sales  force.  The  market  for  OncoScint  CR/OV for
colorectal  cancer diagnosis has been negatively  affected by positron  emission
tomography,  or "PET",  scans.  The  sensitivity of the PET scan in colon cancer
appears to be similar or higher than the OncoScint CR/OV scan. Consequently,  we
are de-emphasizing the marketing of OncoScint CR/OV.

Cancer therapeutic products

Quadramet

Quadramet,  a cancer therapeutic agent, is approved by the FDA for the relief of
pain in patients with metastatic  bone lesions that image on  conventional  bone
scan, a routinely performed nuclear medicine procedure.  Quadramet consists of a
radioactive isotope, Samarium/153/,  which emits beta radiation, and a chelating
agent, EDTMP, which targets the drug to sites of new bone formation.

Once tumors have  metastasized to the skeleton,  they continue to grow and cause
destruction  of the  adjacent  bone.  This erosion of bone  stimulates  new bone
formation which encircles the metastatic tumor. By targeting these areas of bone
formation,  Quadramet  delivers  site-specific  radiation  which  may  result in
significant pain reduction.

                                    -6-
<PAGE>
According to American Cancer Society and National Cancer  Institute  statistics,
about half of all people with cancer  (other  than skin  cancer)  will have bone
metastasis at some point in the course of their disease.  Bone metastasis is one
of the most frequent causes of pain in people with cancer.  We believe that over
200,000  patients  each year will suffer from bone pain that is severe enough to
require intervention.  Based on this information,  we believe that the potential
market for  Quadramet is  approximately  $50 - $80 million in the United  States
based on 20% of this patient population.

Quadramet has many  characteristics  which we believe are  advantageous  for the
treatment of cancer bone pain, including early onset of pain relief,  lasting up
to four months with a single  injection;  predictability  of recovery  from bone
marrow toxicity;  ease of administration and length of pain relief. In addition,
due to its pharmacokinetic  properties, the radioactive plasma half-life is only
five to six hours.  Quadramet is administered as a single intravenous  injection
on an outpatient  basis and directly  targets sites of new bone formation  which
include those areas in the skeleton that have been invaded by metastatic tumors.
Quadramet  exhibits  high and very  selective  uptake in bone with  little or no
detectable accumulation in soft tissue.

A Phase I/II  clinical  study not  sponsored  by us was  carried out by the Mayo
Clinic to  investigate  the use of high doses of Quadrament for the treatment of
primary bone tumors.  The results of that study have recently been  published in
the peer-reviewed  literature and suggested that Quadramet may have a beneficial
role in this treatment.

Current  competitive  treatments  for severe bone cancer pain  include  narcotic
analgesics, external beam radiation therapy, Metastron and Novantrone.

BrachySeed

Of the nearly 200,000 men diagnosed with prostate cancer in 2000,  approximately
60% to 70% will have localized  disease (cancer confined to the prostate gland).
The most common treatment options for localized disease are  prostatectomy,  the
surgical removal of the prostate,  or  brachytherapy,  the implantation of small
radioactive  pellets or "seeds" into the prostate.  Approximately  100 seeds are
implanted during a brachytherapy procedure.

BrachySeed is a unique,  second  generation  radioactive  brachytherapy  implant
developed by Draxis Health, Inc. and its subsidiary,  Draximage, Inc. ("Draxis")
and marketed in the United States by Cytogen.  BrachySeed's unique,  single-weld
design  brings a new level of accuracy,  precision  and safety to sealed  source
implant surgery.  Each BrachySeed is robotically  manufactured and undergoes six
separate quality control checks to ensure uniformity.

While  brachytherapy  has been available since the 1970s, it has only started to
gain prominence and greater acceptance within recent years,  coinciding with the
development of advanced technologies to aid seed placement. Brachytherapy is the
fastest growing  treatment for localized  prostate cancer and offers a number of
potential  benefits  compared to alternative  treatments such as  prostatectomy,
including  rapid  patient  recovery,   lower  costs  and  reduced  incidence  of
complications   such  as  impotency  and   incontinence.   Given  this  improved
side-effect  profile, the market for brachytherapy seeds has grown substantially
over the last three years.  According  to the 1999  Medical  Data  International
Report, by 2003, it is estimated that  approximately half of all newly diagnosed
prostate   cancer   patients   will  opt  for   brachytherapy,   while   radical
prostatectomies  will be  performed  on less than 15% of  patients.  Independent
estimates place the current  brachytherapy  market at $220 million in the United
States and growing by approximately $100-200 million in three to four years.

During 2001, we introduced the iodine  version of the BrachySeed  product and we
are  currently  seeking  to grow our  market  position  in this  segment  of the
brachytherapy  market.  We are  preparing  to  launch  a  palladium  version  of
BrachySeed  during the first half of 2002.  Following the palladium  launch,  we
will be among a select group of companies  offering both an iodine and palladium
version of the brachytherapy product.

Oncology Product Sales, Marketing and Distribution

We currently employ a dedicated field sales force targeting approximately 10,000
healthcare professionals. The primary objective of the sales force is to promote
our  products  to  urologists,   radiation   oncologists  and  nuclear  medicine
physicians.  Within this field force are technical specialists who assist in the
training of nuclear medicine technologists and nuclear medicine physicians,  and
qualify nuclear imaging centers to conduct ProstaScint imaging. We depend on our
own sales  force  for the sale and  marketing  of  ProstaScint,  BrachySeed  and
OncoScint  CR/OV  products and on Berlex for United States sales,  marketing and
distribution  of Quadramet.  Distribution  of ProstaScint and OncoScint CR/OV is
handled by outside  contractors and Berlex and DuPont handle the distribution of
Quadramet. We are the exclusive United States distributor for BrachySeed.

                                    -7-
<PAGE>
During 2000, we terminated our co-marketing arrangement with the Bard Urological
Division of CR Bard Company, Inc. ("Bard").  Historically,  ProstaScint has been
marketed under a co-marketing  arrangement with the urological division of Bard,
a  marketer  of a broad  range of  urology  products.  In 1999,  we  reached  an
agreement  with Bard to phase out the  co-marketing  agreement  so that we could
undertake direct  marketing  responsibility  for the product.  We took this step
because of our view that a highly  trained and  dedicated  internal  sales force
will be able to market our high  technology  products  most  effectively  and to
build a marketing  capability for possible future  products.  The transition was
completed by mid-year 2000.

ProstaScint  is a  technique-dependent  product  that  requires a high degree of
proficiency  in nuclear  imaging  technology  in order to interpret the scan. We
have  established  a network of  accredited  nuclear  medicine  imaging  centers
through  our PIE,  or Partners In  Excellence  Program.  Each PIE site  receives
rigorous  training,  undergoes  proficiency  testing  and is  subject to ongoing
quality  assurance  protocols.  As of December 31, 2001, there were over 350 PIE
sites,  including  a  majority  of  the  National  Cancer   Institute-designated
Comprehensive Cancer Centers. ProstaScint may only be used at PIE sites. We plan
to add PIE  sites on a  selective  basis in order to  ensure  that new sites are
adequately  qualified and committed to a minimum number of scans for maintaining
a high level of competence.  At the present time, we bear partial expense of the
qualification of each site.

In 1999, we reacquired rights to our ProstaScint and OncoScint CR/OV products in
Canada, which were to be marketed by Faulding (Canada),  Inc. We did not pay for
the return of these rights.  OncoScint  CR/OV is approved by the Canadian Health
Care Branch and ProstaScint was approved for sale in Canada in March of 2002. We
believe these  products  will be marketed to major cancer  centers in Canada and
will not require a significant level of resources. However, we cannot be certain
that these products will be  reimbursable  under the Canadian health care system
or  reimbursed  on favorable  economic  terms,  or that they will be accepted by
physicians.

Since May 1994, we have been the sole marketer of OncoScint  CR/OV in the United
States.   In  1996,  we  entered  into  a   distribution   agreement   with  CIS
biointernational,  granting  to CIS  biointernational  the  exclusive  right  to
distribute and sell OncoScint CR/OV  worldwide,  except for in the United States
and Canada.  This  Agreement  was  terminated  effective in March 2001 by mutual
agreement of the parties.

In  October   1998,  we  entered  into  an  exclusive   agreement   with  Berlex
Laboratories,  Inc.  for the  marketing  of  Quadramet,  after  terminating  our
previous  marketing  relationship  with  the  DuPont  Merck  radiopharmaceutical
division.  Berlex re-launched  Quadramet in March 1999. Berlex maintains a sales
force that targets its sales efforts on the oncological  community.  Pursuant to
our  agreement  with Berlex,  we are entitled to royalty  payments  based on net
sales of the Quadramet  product and milestone  payments  based upon sales levels
achieved.

During the first year of  launch,  Quadramet  was  marketed  principally  to the
nuclear  medicine  community,  which  administers  the  treatment  to  patients.
However,  the treatment is more typically  prescribed by care giving physicians,
including medical oncologists,  radiation oncologists and urologists. We believe
that  successful  commercialization  of Quadramet  will depend upon marketing to
these referring physicians.

We plan to  market  Quadramet  in  Canada.  We paid no  costs  to  obtain  these
marketing  rights.  We are evaluating  whether to market  Quadramet  directly in
Canada or through a marketing partner.

We have no significant  foreign revenues.  Although we plan to sell our products
internationally,  we cannot assure you that the products will be accepted by the
foreign  medical  community  or  regulators  or  that we will be able to sell at
adequate  prices.  We will incur  expenses  if we sell our  products  in foreign
countries,  and if our products do not generate  adequate revenues we may not be
able to recover these expenses.

Strategic Alliances and License Agreements

Our strategy is to use alliances with other  companies to increase our financial
resources,  reduce risk and retain an appropriate level of ownership of products
currently  in   development.   In  addition,   through   alliances   with  other
pharmaceutical  and  biotechnology  companies,  we may  obtain  funding,  expand
existing programs,  learn of new technologies,  and gain additional expertise in
developing and marketing products.

Abgenix, Inc.

During 2001, the PSMA  development  Company LLC, a joint venture  between us and
Progenics  Pharmaceuticals,  Inc.  entered into an Agreement with Abgenix,  Inc.
regarding the  development  of fully human  antibodies  to PSMA using  Abgenix's
XenoMouse(TM) technology.


                                    -8-
<PAGE>

Advanced Magnetics, Inc.

In August  2000,  Cytogen and Advanced  Magnetics,  Inc.  mutually  terminated a
previously  negotiated  agreement  pursuant  to  which  Cytogen  was to  acquire
Advanced Magnetics. Instead, the two companies entered into marketing, licensing
and supply  agreements (the "AVM  Agreements").  Under the AVM  Agreements,  the
Company  acquired  exclusive  United  States  rights to two product  candidates,
Combidex and imaging agent Code 7228 for oncology applications.  Combidex, a MRI
contrast  agent  for  the  detection  of  lymph  node  metastases,  received  an
approvable  letter  in June  2000  subject  to  certain  conditions  by the FDA,
following a priority  review.  Code 7228 is being  developed  for  oncology  and
magnetic  resonance  angiography  applications and is expected to enter Phase II
clinical  development  during this year. The Company has rights to Code 7228 for
oncology applications only.

Under the terms of our License and Marketing  Agreement with Advanced Magnetics,
we issued to  Advanced  Magnetics,  2,000,000  shares of common  stock.  Of such
2,000,000  shares,  500,000 are being held in escrow pending the  achievement of
certain milestones  relating to Combidex and Code 7228. The remaining  1,500,000
shares were transferred to Advanced Magnetics,  subject to certain restrictions,
with such  restrictions  expiring  at a rate of 300,000  shares per month,  each
month after the effective date of the agreement.

The License and Marketing  Agreement  will continue  until August 25, 2010,  and
shall thereafter  automatically  renew for successive five year renewal periods,
unless notice of non-renewal or termination is given by us or Advanced Magnetics
90 days prior to the  commencement of any renewal  period,  and unless and until
terminated pursuant to the terms thereof.

There can be no assurance  that Advanced  Magnetics will receive FDA approval to
market Combidex or Code 7228 in the United States.

AlphaVax

In 2001,  the PSMA  Development  Company,  LLC entered  into a  development  and
license  agreement  with  AlphaVax to utilize  their  proprietary  viral  vector
technology to deliver the PSMA gene  systemically.  This agreement contains both
milestone and royalty payments. We believe that this technology, if successfully
deployed, may have important advantages in targeting immune stimulating cells in
vivo which impact on the progression of cancer.

Berlex Laboratories, Inc.

In October 1998, we entered into a License  Agreement with Berlex  Laboratories,
Inc. regarding the marketing of Quadramet, a radiopharmaceutical product used to
provide pain relief from cancer spreading to the bone. As consideration  for the
rights granted, Berlex Laboratories agreed to pay Cytogen royalties based on net
sales, as defined in the Agreement.

This  Agreement  will expire  twenty  years from the date of execution or on the
date of expiration of the last to expire, licensed patent, whichever is later.

Draxis Health, Inc.

In December 2000, we entered into a Product  Manufacturing  and Supply Agreement
and a License and  Distribution  Agreement  with Draxis to, among other  things,
market and  distribute  BrachySeed  implants for prostate  cancer therapy in the
United States.  Under the agreement,  Draxis will supply  radioactive iodine and
palladium  seeds to us in exchange for royalties on sales and certain  milestone
payments.  The FDA granted marketing  approval for BrachySeed in September 2000.
We launched the radioactive  iodine  BrachySeed in the United States in February
2001.  We expect to begin  selling the  palladium  version of  BrachySeed in the
United States during the first half of 2002. We cannot be certain,  however,  of
the  market  acceptance  of  these  products  or  whether  these  products  will
significantly increase our revenues.

                                    -9-
<PAGE>

We agreed to pay Draxis an aggregate of  $2,000,000  in milestone  payments,  as
follows: (i) $500,000 upon the execution of the License and Distribution and the
product  manufacturing and supply agreement,  (ii) $500,000 upon the first sale,
as  defined  therein,   of  iodine  BrachySeed  from  Draxis  to  Cytogen,   and
(iii)$1,000,000 upon the first sale, as defined therein, of palladium BrachySeed
from  Draxis to  Cytogen.  We have paid the first two  milestone  payments.  The
License and  Distribution  Agreement  will expire on December 31,  2010,  unless
earlier terminated pursuant to the provisions thereof.

The Product  Manufacturing  and Supply  Agreement,  pursuant to which Draxis has
agreed to  manufacture  and supply iodine and  palladium  BrachySeed to us, will
terminate on December 31, 2010. We are currently negotiating a new manufacturing
and supply  agreement  with Draxis.  In the interim  both parties are  operating
under the terms of the existing agreement.

Elan Corporation, plc

We entered into a license agreement granting Elan worldwide rights to a group of
peptides  and  associated  technology  for  orally  administered  drugs that are
transported across the gastrointestinal  epithelium,  as well as rights to other
orally  delivered drugs derived from the research  program.  Elan is responsible
for the further  development and  commercialization  of this technology.  We are
entitled to royalties  from sales of any product  developed  and  commercialized
based on this technology.

Memorial Sloan-Kettering Cancer Center

In 1993, we began a development  program with  Memorial  Sloan-Kettering  Cancer
Center involving PSMA and our proprietary monoclonal antibody. In November 1996,
we exercised an option for and obtained an exclusive  worldwide  license to this
technology.

Molecular Staging, Inc.

We obtained an  exclusive,  world-wide  license from  privately  held  Molecular
Staging,  Inc. for technology to be used in developing in vitro diagnostic tests
utilizing  PSMA and PSA. We  anticipate  initiating a clinical  trial of the PSA
assay and determining proof of concept for the PSMA test during 2003.

Northwest Biotherapeutics, Inc.

We  licensed  PSMA  through  our  subsidiary,   Prostagen,  Inc.,  to  Northwest
Biotherapeutics,  Inc., for  development of in vitro  dendritic cell  processing
immunotherapy  to  prostate  cancer.  Prostagen  also  licensed  exclusive  PSMA
manufacturing   rights  for  immunotherapy  to  Northwest   Clinicals,   LLC,  a
corporation formed and co-owned by Northwest  Biotherapeutics and Prostagen.  In
2000, we executed a new sublicense agreement with Northwest Biotherapeutics Inc.
clarifying  their  rights  to make  and use  PSMA  for ex vivo  prostate  cancer
immunotherapy.   The  license  agreement  with  Northwest  Clinicals,   LLC  was
terminated and the manufacturing  rights  thereunder  returned to Cytogen except
for those  granted  under the  newly-executed  license  with  respect to ex vivo
immunotherapy.

Progenics Pharmaceuticals, Inc.

In 1999, we entered into a joint venture with Progenics Pharmaceuticals, Inc. to
develop  products  utilizing our PSMA  technology.  The first of these products,
currently under development,  is a therapeutic prostate cancer vaccine utilizing
a PSMA protein/adjuvant  approach.  Our current plans are that this approach, if
successful in pre-clinical development,  should proceed to human clinical trials
in  2002.  We  are  also   developing   through  this  venture   antibody  based
immunotherapy  for prostate cancer. We believe that these drugs, if successfully
developed,  could play an  important  role in the  treatment  or  prevention  of
advanced prostate cancer and other cancers where PSMA is expressed (e.g. breast,
colon, etc.).

The Dow Chemical Company

In March 1993, we obtained an exclusive license from The Dow Chemical Company to
North American rights to use Quadramet as a therapeutic  radiopharmaceutical for
metabolic  bone disease or tumor  regression  for cancer caused by metastatic or
primary cancer in bone in humans, and for the treatment of disease characterized
by  osteoblastic  response in humans.  In November  1998,  Dow also extended our
exclusive rights for use of Quadramet in treating advanced rheumatoid  arthritis
to Europe, Japan and other countries in addition to North America.

SIGNAL TRANSDUCTION INHIBITORS

Background

The last decade of research has led to an increased  understanding  of how cells
communicate  with each other to  coordinate  the growth and  maintenance  of the
multitude of tissues within the human body. A key element of this  communication
network  is the  transmission  of a signal  from the  exterior  of a cell to its

                                    -10-

<PAGE>

interior,  resulting in the activation of specific intracellular processes. Many
such  signaling  pathways  culminate  in  the  nucleus,  which  results  in  the
activation  or  suppression  of specific  genes.  This process is called  signal
transduction.  An integral part of signal  transduction  is the  interaction  of
ligands,  receptors and intracellular signal transduction molecules ("downstream
signaling molecules").

In general terms, chemical messengers may be released by one cell to communicate
with a target  cell by  binding  to  specific  receptors  on the  target  cell's
surface.  A receptor  generally  takes the form of a protein  that  straddles  a
cell's membrane, with its "ligand-binding domain" protruding out of the cell and
its "intracellular  domain" anchored inside the cell. When a ligand binds to its
receptor, the newly formed receptor/ligand  complex triggers the activation of a
cascade of downstream signaling molecules, thereby transmitting the message from
the exterior of the cell to its interior.  The  intracellular  response may take
the  form of  various  structural  or  biochemical  alterations  facilitating  a
specific response to the  extracellular  message.  If the  intracellular  signal
propagates to the nucleus, it dictates the activation or suppression of specific
genes,  resulting  in the  production  of  proteins  that  carry out a  specific
biological response.  Depending on the specific ligand,  receptor and downstream
signaling  molecules,  the resulting  signalling  cascade  controls  diverse and
distinct cellular processes. For example, metabolic changes can be effected by a
ligand such as insulin, which, after binding to the insulin receptor,  activates
a specific set of downstream  signaling  molecules  within the cell,  ultimately
leading  to the  regulation  of  glucose  uptake  and  other  insulin-associated
functions.

Functional proteomics has proven to be an effective  drug-discovery platform and
mapping key  signaling  molecules  in  biochemical  pathways  will be central to
future drug  discovery  efforts.  Because of their link to  disease,  most major
pharmaceutical  and biotechnology  companies have active drug discovery programs
based on understanding signal transduction pathways.

The  application of functional  proteomics in signal  transduction-based  target
identification  and validation is an important area of research and  development
at present.  Various genomic and proteomic  approaches are  contributing  toward
mapping  signal  transduction  and  linking  it to  disease,  and this  platform
promises to have a very significant future in drug discovery.

Drug discovery

The traditional drug discovery  process involves testing or screening  compounds
in disease models. Researchers often engage in the process with little knowledge
of the  intracellular  processes  underlying  the disease or the  specific  drug
target  within the cell.  Thus,  companies  must  screen a very large  number of
arbitrarily  selected  compounds to obtain a desired  change in a disease model.
While this approach sometimes produces drugs successfully, we believe it has the
following limitations:

     -    inefficiency:   it  is  capital   intensive  and  time   consuming  in
          identifying and validating targets;

     -    low productivity: it yields relatively few new drug candidates;

     -    lack  of  information:   it  provides  little  information  about  the
          intracellular  processes  or targets,  to guide target  selection  and
          subsequent drug development; and

     -    risk of side effects:  it often results in drug candidates with a risk
          of serious side effects.

In an effort to overcome some of the  difficulties  associated with  traditional
drug  discovery,  some  scientists  have turned to genomics as a means of better
understanding   the  roots  of  disease.   These   scientists   believe  that  a
comprehensive  knowledge  of an  organism's  genetic  makeup  may  lead  to more
efficient drug  discovery.  While useful,  DNA sequence  analysis alone does not
lead efficiently to new target  identification,  because one cannot easily infer
the  functions of gene  products,  or proteins,  and protein  pathways  from DNA
sequence.

Functional proteomic technologies offer significant opportunities to improve the
drug discovery  process.  By focusing on protein activity levels,  or expression
levels,  researchers  are able to learn  more  about the role  proteins  play in
causing and treating disease. Functional proteomics also aids in deciphering the
mechanisms of disease and increasing  both the opportunity to develop drugs with
reduced side effects and an increased  probability of clinical trial success. We
believe  functional  proteomics has the potential to increase  substantially the
number of drug targets and thereby the number of novel new drugs.


                                    -11-

<PAGE>

                     DRUG DISCOVERY AND DEVELOPMENT PROCESS

Early Discovery..........   Compound Discovery and Development..................

                                                                Lead      Pre-
    Target       Target       Screen     Primary  Secondary   Compound  clinical
Identification Validation   Development Screening Screening Optimization Studies


               OUR TECHNOLOGY IS AIMED AT ACCELERATING FOUR STEPS
                 IN THE DRUG DISCOVERY AND DEVELOPMENT PROCESS.

We believe  that  target  identification,  validation  and  optimization  may be
facilitated  by the use of  AxCell's  proprietary  signal  transduction  pathway
information and functional  proteomics tools. We anticipate that this technology
platform will allow  identification  of  disease-related  alterations in protein
pathways by comparing  protein  pathways in cells and tissues  associated with a
disease model with pathways in normal  tissue.  We believe that this  technology
will  also  enable  researchers  to more  efficiently  identify  potential  drug
targets.

We also  develop  high-throughput  screens for drug  development  in cases where
targets are  proprietary to us.  Customers may license these targets and receive
the components necessary for a high-throughput screen.

Finally,  we believe that we can accelerate lead compound  optimization  through
the supply of related  protein-component  family members,  or protein arrays. We
believe that these protein  arrays  contain the proteins with which a researcher
can test a lead  compound  for  cross-protein  interaction.  Such  cross-protein
interactions  may also  represent the side effects which the lead compound might
invoke.  We believe that  modifications  of the  structure of the lead  compound
followed by further  testing with the target  array will lead to more  efficient
lead compound optimization.

Our technology

Our core proteomics technology is based on an understanding of the principles of
the binding,  or molecular  recognition,  of antibodies  to antigens.  Through a
sponsored  research  program at the University of North Carolina at Chapel Hill,
coupled with our internal research,  we studied the interactions between peptide
ligands  and  proteins.   This  research  led  to  a  better   understanding  of
protein-protein   interactions,   and  ultimately  to  proprietary  methods  for
identifying and quantifying  such  interactions.  We have a portfolio of patents
and patent applications based on inventions generated both internally and at the
University  of  North   Carolina  at  Chapel  Hill,   relating  to  methods  for
identification  of  proteins  which  interact  in  cellular  pathways,  and  the
compositions of such proteins.  Certain patents and patent applications filed on
behalf of the  University of North  Carolina at Chapel Hill are the subject of a
worldwide,   exclusive  license  to  us.  We  established   AxCell   Biosciences
Corporation  as a  subsidiary  to  harness  the  commercial  potential  of  this
proprietary platform technology in the area of proteomics.

We have developed several integrated,  high-throughput  technologies designed to
determine protein pathways quickly and cost effectively.  The  identification of
protein pathways is a critical step in drug discovery.


                                    -12-

<PAGE>
                   [GRAPHIC OF TECHNOLOGY FLOW CHART OMITTED]

As part of  functional  signaling  pathways,  protein  interaction  is  mediated
through  binding of a ligand  sequence  on one  protein and a domain on another,
similar to the  relationship  between a lock and a key.  Domains are  functional
recognition sites on proteins where the actual  interaction  occurs with another
protein.  Ligands are the regions of the other  proteins  that interact with the
domains. In the human proteome, domains are classified in families such as WW or
PDZ.

As  seen in the  above  illustration,  we  identify  domain-ligand  interactions
through the use of proprietary phage display libraries.  The process begins with
a domain from a known  protein  family such as WW. A library of peptides,  which
are short sequences of amino acids (the building blocks of proteins), is exposed
to this domain to identify  those  peptides that act as ligands and have binding
affinity to the domain (Step 1).

We then use these ligands as probes to find other proteins that contain a domain
which  exhibits  an affinity  to the  ligands.  This  technique  identifies  the
complete family of domains that interacts with a set of ligands (Step 2). Once a
set of ligands and domains are  identified,  we measure the strength of affinity
between  each  domain and ligand  (Step 3).  These steps are  repeated  with all
signaling domains and their  corresponding  ligands.  This approach allows us to
create the database of ligand-domain  binding  interactions and thus establish a
functional relationship between the set of ligands and domains (Step 4).

Using this database and computational methods, or bioinformatics,  we define the
rules of interaction between domains and ligands. Using bioinformatic  analyses,
each interacting protein can be identified,  and through  ligand-domain  pairing
biological  pathways can be constructed (Step 5). These biological  pathways are
analogous to a circuit diagram of intracellular communication.

Analyses of the  aberrations in the interaction of proteins with one another can
then be  studied  to  identify  those  proteins  that play a role in  causing or
preventing disease and can be targeted for drug development (Step 6).

Proprietary algorithm development

Through  the use of our  platform  technologies  described  above  and the  data
generated   with   them,   we  plan  to   develop   proprietary   modeling   and
characterization  algorithms.  In addition,  we believe that  ProChart  contains
comprehensive  protein  interaction  and pathway data that we believe will allow
the  modeling  and   characterization   of  ligands  using  connections  to  the
corresponding  domains. We also plan to develop pathway models using the data in
ProChart. AxCell's ProChart database content and functional proteomics tools are
available on a non-exclusive basis to biotechnology, pharmaceutical and academic
researchers.  AxCell is expanding and  accelerating  its research  activities to
further  elucidate the role of novel proteins and pathways in ProChart,  through
both external collaborations and internal data mining.

                                    -13-

<PAGE>

Our products, technologies and services

ProChart

ProChart is a proprietary  database of signal transduction  pathway information,
created using AxCell's patented,  high-throughput technology, which differs from
the most widely used method for identifying protein interactions,  such as yeast
two-hybrid. Using data contained in ProChart,  researchers may be better able to
design drugs that target pathways  related to a specific  disease while avoiding
those  pathways  associated  with unwanted side  effects.  ProChart  allows drug
discovery researchers to evaluate a large number of targets and select a logical
subset for experimentation. ProChart became commercially available in June 2001,
although  subscriptions  to the database  have been limited to one customer that
entered into a  three-year,  non-exclusive  agreement  and that will  commence a
research  program with AxCell.  To date, we have not generated any revenues from
ProChart.

Genetic Diversity Library (GDL(TM))

AxCell  identifies  domain-ligand  interactions  through the use of patented M13
phage  libraries.  Although GDL is  specifically  patented,  AxCell  maintains a
license  from  Dyax  Corporation  for the  general  technique  of phage  display
technology  conducted in M13 bacteriophage.  The difference between AxCell's GDL
libraries and phage display library  technology as applied by others is based on
the unusually  large inserts in the GDL  libraries.  While AxCell  expresses the
usual linear and cyclic  oligopeptides,  the Company has also created  libraries
containing  inserts of 38- and 45mer  linear and cyclic  peptides.  These longer
inserts allow AxCell to study phenomena that depend on longer peptide  sequences
and the folded structures they can assume.

Cloning of Ligand Targets (CLT(TM))

AxCell uses ligands in GDL and others identified using  bioinformatics as probes
to find other proteins that contain a domain, which exhibits binding affinity to
the ligands.  Using cloned DNA (cDNA) libraries,  the CLT process identifies the
complete  family of domains that interacts  with a set of ligands.  CLT exploits
the   cross-reactive   binding   inherent  in   domain-ligand   interactions  to
systematically identify novel domains. The expression and purification system to
create  protein  domains at AxCell is the  Glutathione-S-Transferase  (GST) Gene
Fusion  System in E.  coli.  Occasionally,  other  expression  and  purification
systems like  Hexa-His or Maltose gene fusion  systems are used.  Domains  range
from about 30-120 amino acids in length. When fused with GST for expression they
are about 22-40kDa in size.

Affinity Screens

Once  ligands and  domains  are  identified,  synthesized  and cloned,  they are
screened  using a high  throughput  screening  (HTS) assay  based on  technology
similar to ELISA.  In it,  domains are adsorbed to  microplates,  and subsequent
binding  of  peptide  ligands  is  detected  by means of the  N-terminal  biotin
included in the peptide  ligand.  After  screening in this HTS format,  a second
assay is performed  to generate a binding  saturation  curve.  This second assay
provides a quantitative  measurement of binding strength for individual pairs of
domain-ligand  interactions.  The  GDL and  CLT  steps  are  repeated  with  all
signaling domains and their corresponding  ligands.  This approach allows AxCell
to create the ProChart database of ligand-domain  binding  interactions and thus
establish a  functional  relationship  between  the set of ligands and  domains.
Using this database and computational methods, or bioinformatics, AxCell defines
the rules of  interaction  between  domains  and  ligands.  This key  feature of
AxCell's  technology allows researchers to evaluate relative binding strength of
interactions in silico.

Bioinformatics

Bioinformatics (BFX) is AxCell's most high throughput discovery  technology.  We
apply  algorithms  developed  by our  BFX  group  to  publicly  available  human
proteomic data in order to identify previously  uncharacterized  binding domains
and  candidate  ligand  peptides for our "wet bench"  operations,  including HTS
assays as well as GDL and CLT discovery  technologies.  Most of these algorithms
are  based on  recognition  of  homology  of  uncharacterized  sequence  data to
proteomic and genomic data from the  peer-reviewed  literature.  AxCell searches
public  databases for such  sequences and catalogs them for synthesis and use in
its HTS assays.

Peptide Synthesis

AxCell currently  produces more than 1,000 synthetic  peptide ligands per month.
The consensus  sequences  provided by our BFX  algorithms are generally only 1-4
amino acids in length. But in manufacturing our fragments of human proteins,  we
include 4 to 6 amino acids on either side of the consensus,  in order to achieve
appropriate specificity.  Thus the ligands average approximately 12 amino acids.

                                      -14-
<PAGE>

With the addition of a spacer sequence and a biotin tag, the peptides achieve an
average  length of 17 amino acids total,  with a range from 14-29 amino acids in
length.  In support of AxCell's high throughput  parallel peptide  synthesis,  a
high throughput method for validation and quantitation of synthetic peptides has
been developed.  This method includes automated LC-MS analysis, data processing,
and sample purification steps.

Marketing

We previously  established a collaboration with InforMax,  Inc., a publicly held
bioinformatics   provider.   InforMax  is  a  leader  in  the   development   of
bioinformatics  software for  accelerated  drug discovery and has a proven track
record in  software  development.  We are jointly  designing  an  interface  for
ProChart  with InforMax that will be  integrated  with  InforMax's  GenoMax (TM)
product.  GenoMax is a bioinformatics  system that offers high-speed analysis of
both public and proprietary genetic databases within the security of a corporate
firewall.  This system is designed to allow the  subscriber  to evaluate data in
ProChart,  while  accessing  other  public and private  databases.  We have also
developed  an  application   programming   interface  for  ProChart,  to  permit
integration with other  bioinformatics  platforms,  including those developed by
the  customers  themselves.  By taking  advantage  of an existing  bioinformatic
platform,  we plan to  concentrate  our  efforts  on the  development  of  tools
specific to protein pathway data.  InforMax will also market ProChart.  InforMax
has  developed  a  Protein-Protein  Interaction  (PPI)  module  for the  GenoMax
enterprise  bioinformational  system,  a modular  platform of advanced  analysis
programs for genomic and proteomic  applications,  and  successfully  integrated
ProChart.

We are  marketing  ProChart  as  multi-year  subscriptions  allowing  access  to
ProChart inside the customers' corporate firewall. This subscription delivery is
facilitated  using  InforMax's  GenoMax  product  into which  ProChart  has been
integrated.   These  subscriptions  may  include  collaborative   bioinformatics
research projects to analyze specific pathways as requested by a customer.  Such
collaborations may provide additional  revenues,  and may also include milestone
payments  and  royalty-based  revenues  from  any  products  emerging  from  the
collaborative research and developed by our partner.

RESEARCH COLLABORATIONS

AxCell is currently negotiating a Cooperative Research and Development Agreement
with  the  National  Cancer   Institute  (NCI)  to  research  two  major  signal
transduction families and how they impact signaling pathways within cells, which
could lead to the  development of new drugs to treat cancer and other  diseases.
Under  the  terms  of  the   agreement,   relevant  data   resulting  from  this
collaboration will be added to AxCell's ProChart database of protein interaction
information. The research at the NCI will be led by Stephen Shaw, M.D., chief of
the Human Immunology  Section at the Experimental  Immunology Branch of the NCI.
Dr. Shaw is an  immunologist  who has been primary or senior author on more than
150 scientific  publications  and is a recipient of the Institute for Scientific
Information Highly Cited Researchers award.

AxCell entered into a Research  Collaboration  Agreement with Mount Sinai School
of Medicine to research  protein  interactions  in the WW protein domain family,
which is believed to play a role in the  development  of muscular  dystrophy and
neurodegenerative  diseases, such as Alzheimer's disease. The principal goals of
the research program will be to research the binding of ligands to the WW domain
of dystrophin, utrophin,  beta-dystroglycan,  FE65 and FE65-like proteins, which
could   accelerate   drug   discovery   for  muscular   dystrophy   and  certain
neurodegenerative  diseases.  The  collaboration  will use  specific  data  from
AxCell's  ProChart  database,  which includes the first and only complete map of
the known WW protein domain family. The WW protein domain family is the first of
approximately  60-80 protein domain families involved in signal  transduction to
be mapped  successfully.  The collaboration will be led by Marius Sudol,  Ph.D.,
associate  professor  in the  Medicine  Department  at the Mount Sinai School of
Medicine in New York.

AxCell signed a letter of intent with Kimmel  Cancer Center at Thomas  Jefferson
University to research protein interactions  associated with an undisclosed gene
believed  to  play a role  as a  tumor  suppressor  in  multiple  cancers.  Upon
execution  of the final  agreement,  the  research  will be led by Kay  Huebner,

                                     -15-
<PAGE>

Ph.D., professor of microbiology and immunology at Jefferson Medical College and
Carlo  Croce,  M.D.,  professor  and chair of  microbiology  and  immunology  at
Jefferson  Medical College of Thomas  Jefferson  University in Philadelphia  and
director of Jefferson's Kimmel Cancer Center.  Dr. Huebner's  laboratory focuses
on finding and studying genes that are frequently altered in cancers,  and whose
alteration,  usually  leading  to loss of  expression  of the  encoded  protein,
contributes to development and progression of the cancers.

AxCell signed a binding term sheet with Pluvita  Corporation for a pilot program
to research protein interactions  associated with a specific  protein-based drug
target. Upon execution of the final agreement,  the principal goals of the pilot
research  program  will be to  identify  the  full-length  peptides  (amino acid
chains) that bind to Pluvita's compound;  identify apparent consensus sequences;
and analyze the  representation  of those  sequences  within the human proteome.
AxCell will also determine apparent affinities of compound binding observed with
the isolated peptides. Based on current expectations,  the research program with
Pluvita will not begin until late 2002.  In addition to this  research  program,
Pluvita  Corporation entered into a three-year,  non-exclusive  agreement to use
AxCell's ProChart in a range of drug discovery initiatives.

Our proteomics patents and proprietary rights position

Overall,  our patent strategy has focused on composition and use of the proteins
and  peptides  which we are  discovering,  thus  avoiding  the  uncertainty  and
controversy  associated with the patenting of genes. We believe such composition
and use claims should be important because we believe it is likely that proteins
rather than genes will be the targets for new drugs.  This strategy has resulted
in eleven patents.

Among our patents are two issued U.S.  patents relating to peptides that bind to
certain molecules  expressed on cancer cells. We also co-own with the University
of North  Carolina  at  Chapel  Hill an  issued  U.S.  patent  covering  certain
polypeptides  that contain a WW domain U.S.  Patent No.  6,309,820 was issued to
AxCell in 2001,  entitled  "Polypeptides  Having a Functional Domain of Interest
and  Methods of  Identifying  and Using  Same," for our  proprietary  Cloning of
Ligand Targets(TM) (CLT) proteomics technology.

We will market our protein targets under  arrangements  that we anticipate would
include licensing fees, milestone payments and royalty payments as our customers
develop products based on these targets.  We plan to market protein arrays under
a license for use and, where possible, obtain commitments for milestone payments
and  royalty-based   payments  if  the  arrays  contain  novel  protein  targets
proprietary to us.

We intend to pursue  aggressively patent protection for novel synthetic peptides
and novel  naturally  occurring  polypeptides  that we  identify  as  binding to
ligands of interest,  as well as for products and methods relating to the use of
these  polypeptides  and their  respective  genes as  possible  drug  targets in
screening  assays.  We also  intend to seek  patent  protection  for methods and
products relating to our data analysis procedures.

We are the exclusive  licensee of certain patents and patent  applications owned
by the  University  of North  Carolina  at Chapel  Hill,  covering  parts of the
proteomics  technology.  These include eight issued U.S. patents relating to our
phage display  libraries,  methods of using phage display  libraries to identify
peptides  that bind to a target  molecule of interest,  as well as peptides that
bind to certain molecules.

Competition

We are  subject  to  significant  and  increasing  competition  in the  field of
proteomics.  Many  companies  compete in the overall  effort to  understand  the
complex flow from gene sequence,  to transcription  into messenger  riboneucleic
acid, to protein  expression  and finally to biological  activity.  In addition,
most  major  pharmaceutical  and  biotechnology  companies  have  some  level of
internal activity and high interest in these areas.

The technology for analyzing the functions of proteins in a disease setting, and
for mapping interactions between proteins, is relatively new. This technology is
evolving rapidly and developments by competitors, including potential customers,
could make our  technology  obsolete.  A number of  companies  compete  with our
approach to analyzing the proteome,  and others  compete with our technology for
identification of novel proteins and use of proteins for possible drug targets.

Of the several  approaches used  commercially to analyze the proteome,  the main
direct  competitor  with our technology is the yeast  two-hybrid  system.  Three
companies,  Myriad Genetics,  Inc. (NASDAQ:  MYGN), CuraGen Corporation (NASDAQ:
CRGN) and Hybrigenics Inc. use this method to perform large-scale cataloguing of
protein-protein interactions.

AxCell  believes  that its in vitro  approach to detecting  protein  pathways is
complimentary to yeast two-hybrid and other functional proteomics  technologies.
AxCell's in vitro approach offers the following  synergies:  simplicity,  higher
throughput  data   generation,   quantitative   protein   interaction   affinity
measurement,  fewer false  positives,  the rapid  formatting of  high-throughput
screening assays,  and the  identification of specific ligands,  which provide a
starting point for rational drug design.


                                     -16-
<PAGE>

The marriage of AxCell's high throughput  domain-ligand  interaction  technology
(and the resulting  ProChart databse) and yeast two-hybrid  technology offers an
opportunity for significant synergy.  AxCell's technology rapidly yields maps of
protein-to-protein  interactions based upon in vitro measurements. On a selected
basis,  key interactions  could be validated using yeast  two-hybrid  methods to
show that these interactions do indeed occur using an in vivo model.

Strategic alliances

InforMax, Inc.

In September 1999,  AxCell and InforMax,  Inc.  concluded an agreement to market
ProChart as part of an enterprise  bioinformatics solution to the pharmaceutical
and  biotechnology  industries.  The three  year  agreement  also  provides  for
technology development by InforMax to link our database to InforMax's GenoMax, a
new  generation of molecular  biology and genetics  software.  In February 2001,
AxCell and InforMax announced the development of the Protein-Protein Interaction
(PPI) module for the GenoMax enterprise  bioinformatics  system and successfully
integrated  ProChart,  AxCell's growing database of human protein  interactions.
AxCell has developed  technology that provides both qualitative and quantitative
information about a wide range of protein-protein interactions.  The integration
of ProChart with GenoMax was demonstrated publicly for the first time at the CHI
Genome Tri-Conference in San Francisco, CA, in March of 2001.

Compaq Computer Corporation

In  December  1999,  AxCell  entered  into a developer  partnership  with Compaq
Computer  Corporation.  This development program will be facilitated by Compaq's
proven Alpha  architecture,  high performance  64-bit systems that deliver speed
and  scalability  advantages.  Under the agreement,  Compaq has provided us with
hardware for the  development  of our  proteomics  database.  In December  2000,
AxCell  furthered  its strategic  relationship  with Compaq,  adding  additional
hardware  provided by Compaq to continue the  development  of  ProChart.  Due to
increasing  laboratory data output,  AxCell's  computing  requirements have more
than  doubled  and  Compaq's  AlphaServer  cluster  technology  facilitated  the
required expansion.

University of North Carolina

We sponsored  research at, and are the exclusive  licensee of certain patent and
patent  applications and technology owned by the University of North Carolina at
Chapel  Hill,  covering  the  creation  of long  peptides  that may fold to form
three-dimensional  functional  structures,  and of  libraries  composed of these
peptides.  The technology covered by this collaboration has been utilized,  with
other technology we developed, in our proteomics program.

PRODUCT CONTRIBUTION TO REVENUES

Our currently  marketed products and other sources of income constitute a single
business segment. ProstaScint and Quadramet account for a significant percentage
of our product-related revenues. For the years ended December 31, 2001, 2000 and
1999,  revenues related to ProstaScint  accounted for approximately 65%, 66% and
57%,  respectively,  of our total revenues  while revenues  related to Quadramet
accounted  for  approximately  18%,  19%  and  9%,  respectively,  of our  total
revenues.

RESEARCH AND DEVELOPMENT

Our research and development  expenditures  include payments we made to customer
sponsored  research  programs,  the costs  incurred to develop  PSMA through our
joint venture with Progenics Pharmaceuticals,  payments to DSM Biologics for the
development  and  manufacture  of  ProstaScint  and  the  cost  to  develop  the
functional   proteomics  program  at  AxCell.  Our  expenses  for  research  and
development activities were:

     -    2001-- $ 10.3 million

     -    2000 -- $7.0 million

     -    1999 -- $3.8 million


                                      -17-
<PAGE>


We  intend to pursue  research  and  development  activities  having  commercial
potential and to review all of our programs to determine whether possible market
opportunities,  near and longer term,  provide an adequate return to justify the
commitment of human and economic  resources to their initiation or continuation.
We  incurred  a  significant  increase  of  $3.3  million  in our  research  and
development expenditures during 2001. We expect to incur a significant amount of
expenses in future years for our share of the development of immunotherapies for
prostate and other  cancers  through our joint  venture with  Progenics.  During
2001,  we  recognized  $332,000 of expenses  related to the joint  venture  with
Progenics, $3.2 million for the DSM development program and $4.9 million for the
proteomics program at AxCell.

COMPETITION

The  biotechnology  and   pharmaceutical   industries  are  subject  to  intense
competition,   including   competition  from  large  pharmaceutical   companies,
biotechnology   companies  and  other   companies,   universities  and  research
institutions.  Our existing  therapeutic products compete with the products of a
wide variety of other firms,  including firms that provide products used in more
traditional   treatments  or  therapies,   such  as  external  beam   radiation,
chemotherapy  agents and  narcotic  analgesics.  In  addition,  our existing and
potential  competitors may be able to develop technologies that are as effective
as, or more  effective than those offered by us, which would render our products
noncompetitive  or  obsolete.  Moreover,  many  of our  existing  and  potential
competitors   have   substantially   greater   financial,    marketing,   sales,
manufacturing, distribution and technological resources than we do. Our existing
and  potential  competitors  may be in the  process  of  seeking  FDA or foreign
regulatory  approval for their respective products or may also enjoy substantial
advantages over us in terms of research and development expertise, experience in
conducting  clinical  trials,  experience in regulatory  matters,  manufacturing
efficiency,  name  recognition,  sales and marketing  expertise and distribution
channels.  We believe  that  competition  for our products is based upon several
factors,  including product efficacy, safety,  cost-effectiveness,  ease of use,
availability, price, patent position and effective product promotion.

We expect  competition  to  intensify  in the fields in which we are involved as
technical  advances in such fields are made and become  more  widely  known.  We
cannot assure you, however,  that we or our collaborative  partners will be able
to develop our products  successfully  or that we will obtain patents to provide
protection  against  competitors.  Moreover,  we  cannot  assure  you  that  our
competitors will not succeed in developing  therapeutic products that circumvent
our  products  or  that  these   competitors  will  not  succeed  in  developing
technologies  or products that are more  effective  than those  developed by us.
Notably,  Nycomed-Amersham,  a company with substantially greater resources than
ours, is dominant in  brachytherapy.  In addition,  many of these  companies may
have  more  experience  in  establishing  third-party  reimbursement  for  their
products.  Accordingly,  we cannot  assure  you that we will be able to  compete
effectively  against existing or potential  competitors or that competition will
not have a material  adverse  effect on our  business,  financial  condition and
results of operations.

MANUFACTURING

Our products must be manufactured in compliance with regulatory requirements and
at  commercially   acceptable  costs.   ProstaScint  and  OncoScint  CR/OV  were
manufactured  at a current  good  manufacturing  practices,  or cGMP,  compliant
manufacturing  facility  in  Princeton,  New Jersey  which is  operated  by Bard
BioPharma L.P., a subsidiary of Purdue  BioPharma  ("Purdue").  An Establishment
License Application for the facility was approved by the FDA for the manufacture
of  ProstaScint  in October 1996 and for OncoScint  CR/OV in December  1992. Our
manufacturing  agreement  with Purdue  expired in January 2002. In July 2000, we
entered  into a  Development  and  Manufacturing  Agreement  with DSM  Biologics
Company B.V.  ("DSM"),  pursuant to which DSM will conduct  certain  development
activities with respect to ProstaScint for testing and evaluation purposes.  Our
intention is that DSM would replace the arrangement with Purdue, with respect to
the manufacture of ProstaScint.  Under the terms of such agreement,  and subject
to the regulatory  approvals for the  manufacturing of ProstaScint,  the parties
are  obligated  to  negotiate  in  good  faith  a long  term  supply  agreement.
Notwithstanding  the parties'  obligations  to perform under the agreement or to
negotiate a supply  agreement in good faith,  we cannot be certain that DSM will
satisfactorily  perform its  obligations  thereunder or that the parties will be
able to negotiate a supply agreement on commercially  satisfactory  terms, if at
all. Our failure to  negotiate a supply  agreement  on  commercially  reasonable
terms will have a material adverse effect on our business,  financial  condition
and results of  operations.  At December  31, 2001 we have  sufficient  level of
ProstaScint  inventory  on hand for 2 years  while  working  to  secure a supply
arrangement for ProstaScint.

With regard to OncoScint  CR/OV, we have a sufficient level of inventory on hand
for the foreseeable future.

                                     -18-
<PAGE>

Any  new  manufacturing  arrangement  will  be  subject  to FDA  oversight,  and
qualification of a new manufacturer with the FDA could take a significant amount
of time.  Any failure to obtain such  regulatory  approvals will have a material
adverse effect on our business, financial condition and results of operations.

Raw materials and suppliers

The  active raw  materials  used for the  manufacture  of our  products  include
antibodies.  We anticipate  that our existing  supply of OncoScint CR/OV will be
able  to meet  our  needs  for  commercial  quantities  of the  product  for the
foreseeable future. We are de-emphasizing the marketing of this product.

We do not  have  arrangements  with any  outside  suppliers  for the  monoclonal
antibody for ProstaScint. This material will be supplied by the same third party
manufacturer that will make ProstaScint. We are currently working to secure such
an arrangement.

Quadramet is  manufactured  by DuPont  pursuant to an agreement with both Berlex
and Cytogen. Some components of Quadramet,  particularly  Samarium153 and EDTMP,
are provided to DuPont by outside suppliers. DuPont obtains its requirements for
Samarium153 from one supplier.  Alternative sources for these components may not
be readily  available.  If DuPont  cannot  obtain  sufficient  quantities of the
components on commercially  reasonable terms, or in a timely manner, it would be
unable to manufacture Quadramet on a timely and cost-effective basis which could
have a material adverse effect on our business,  financial condition and results
of operations.

Pursuant to the terms of our Product  Manufacturing  and Supply  Agreement  with
Draxis,   we  rely  on   Draxis  as  the  sole   supplier   of   BrachySeed,   a
second-generation  radioactive  pellet used in the treatment of prostate cancer.
If  Draxis  fails  or is  unable  to  perform  under  such  agreement,  we could
experience a material  adverse effect on our business,  financial  condition and
results of operations.

PATENTS AND PROPRIETARY RIGHTS

Consistent  with industry  practice,  we have a policy of using patent and trade
secret  protection  to preserve our right to exploit the results of our research
and development  activities and, to the extent it may be necessary or advisable,
to exclude others from appropriating our proprietary technology.

Our policy is to aggressively protect our proprietary  technology by selectively
seeking  patent  protection  in a worldwide  program.  In addition to the United
States, we file patent applications in Canada,  major European countries,  Japan
and  additional  foreign  countries on a selective  basis to protect  inventions
important to the  development of our business.  We believe that the countries in
which we have  obtained  and are seeking  patent  coverage  for our  proprietary
technology represent the major focus of the pharmaceutical  industry in which we
and certain of our licensees will market our respective products.

We hold, or are the licensee of, 41 current United States patents and 45 current
foreign patents. We have filed and currently have pending a number of additional
United States and foreign patent  applications,  relating to certain  aspects of
our  technology for diagnostic  and  therapeutic  products,  and the methods for
their production and use. We intend to file patent  applications with respect to
subsequent developments and improvements,  when we believe such protection is in
our best interest.

We are the exclusive  licensee of certain patents and patent  applications owned
by the  University  of North  Carolina  at Chapel  Hill,  covering  parts of the
proteomics technology. These include eight issued United States patents relating
to our phage  display  libraries,  methods of using phage  display  libraries to
identify  peptides  that  bind to a  target  molecule  of  interest,  as well as
peptides  that bind to certain  molecules.  We hold an exclusive  license  under
certain  patents and patent  applications  held by the Memorial  Sloan-Kettering
Institute  covering PSMA. We are the exclusive licensee of certain United States
patents and applications held by Dow covering Quadramet.

Among our patents are two issued United States patents relating to peptides that
bind to certain  molecules  expressed on cancer  cells.  We also co-own with the
University  of North  Carolina at Chapel  Hill an issued  United  States  patent
covering certain polypeptides that contain a WW domain.

We may be entitled under certain circumstances to seek extension of the terms of
our patents.

                                     -19-
<PAGE>

We also  rely  upon,  and  intend  to  continue  to rely  upon,  trade  secrets,
unpatented  proprietary  know-how and  continuing  technological  innovation  to
develop  and  maintain  our  competitive   position.  We  typically  enter  into
confidentiality  agreements  with our licensees and any scientific  consultants,
and each of our  employees  has  entered  into  agreements  requiring  that they
forbear from disclosing confidential information, and in some cases assign to us
all rights in any  inventions  made  while in our  employ.  We believe  that our
valuable proprietary information is protected to the fullest extent practicable;
however, we cannot assure you that:

     -    additional  patents  will be  issued  to us in any or all  appropriate
          jurisdictions;

     -    litigation  will not be  commenced  seeking  to  challenge  our patent
          protection or that challenges will not be successful;

     -    our processes or products do not or will not infringe upon the patents
          of third parties; or

     -    the scope of patents  issued will  successfully  prevent third parties
          from developing similar and competitive products.

The technology  applicable to our products is developing  rapidly. A substantial
number  of  patents  have  been  issued  to other  biotechnology  companies.  In
addition,  competitors have filed applications for, or have been issued, patents
and may obtain additional patents and proprietary rights relating to products or
processes  that are  competitive  with ours. In addition,  others may have filed
patent  applications  and may  have  been  issued  patents  to  products  and to
technologies potentially useful to us or necessary to commercialize our products
or to achieve our business  goals.  We cannot assure you that we will be able to
obtain licenses of patents on acceptable terms.

We cannot predict how any patent  litigation will affect our efforts to develop,
manufacture or market our products.

We are  defendants in litigation  filed against us in the United States  Federal
Court for the District of New Jersey with respect to claims that our ProstaScint
product infringes a third-party patent and we have disclosed certain information
regarding such lawsuit under the caption "Legal Proceedings", herein.

GOVERNMENT REGULATION AND PRODUCT TESTING

The  development,  manufacture  and  sale  of  medical  products  utilizing  our
technology  are governed by a variety of statutes and  regulations in the United
States and by comparable laws and agency regulations in most foreign countries.

The Food,  Drug and Cosmetic Act requires that our products be  manufactured  in
FDA registered  facilities  subject to inspection.  The manufacturer  must be in
compliance with current Good Manufacturing Practice (cGMP) which imposes certain
procedural and documentation requirements upon us and our manufacturing partners
with respect to manufacturing and quality control activities. Noncompliance with
cGMP can result in, among other things,  fines,  injunctions,  civil  penalties,
recalls or seizures of  products,  total or partial  suspension  of  production,
failure of the government to grant premarket clearance or premarket approval for
drugs,  withdrawal of marketing approvals and criminal prosecution.  Any failure
by us or our  manufacturing  partners  to comply with the  requirements  of cGMP
could have a material  adverse effect on our business,  financial  condition and
results of operations.

Diagnostic  and  therapeutic  products in the United States are regulated by the
Food Drug and Cosmetic Act and the Public  Health  Service Act, and by FDA rules
and  regulations  promulgated  thereunder.  These laws and  regulations  require
carefully controlled research and testing of products,  government notification,
review  and/or  approval  prior to marketing  the  products,  inspection  and/or
licensing  of  manufacturing  and  production  facilities,  adherence  to  cGMP,
compliance  with  product   specifications,   labeling,   and  other  applicable
regulations.

Medical  products that we develop or intend to market are subject to substantial
governmental  regulation  and may be classified as new drugs or biologics  under
the Food Drug and Cosmetic Act. The FDA and similar  health  authorities in most
other countries must approve or license the diagnostic and therapeutic  products
before they can be commercially  marketed.  In order to obtain FDA approval,  an
applicant must submit, as relevant for the particular product,  proof of safety,
purity,  potency  and  efficacy.  In most  cases this  proof  entails  extensive
pre-clinical,  clinical  and  laboratory  studies.  Both  the  studies  and  the
preparation and  prosecution of those  applications by the FDA are expensive and
time  consuming,  and each may take several years to complete.  Difficulties  or
unanticipated  costs  may  be  encountered  by  us or  our  licensees  in  their
respective efforts to secure necessary governmental approval or licenses,  which
could delay or preclude  us or our  licensees  from  marketing  their  products.

                                     -20-
<PAGE>

Limited  indications  for use or other  conditions  could  also be placed on any
approvals  that could  restrict the commercial  applications  of products.  With
respect to patented  products or technologies,  delays imposed by the government
approval process may materially  reduce the period during which we will have the
exclusive  right to exploit them,  because  patent  protection  lasts only for a
limited  time,  beginning on the date the patent is first granted in the case of
United  States  patent  applications  filed prior to June 6, 1995,  and when the
patent  application is first filed in the case of patent  applications  filed in
the United  States after June 6, 1995,  and  applications  filed in the European
Economic Community. We intend to seek to maximize the useful life of our patents
under the Patent  Term  Restoration  Act of 1984 in the United  States and under
similar laws if available in other countries.

The  majority  of  our  diagnostic  and  therapeutic  products  will  likely  be
classified  as new drugs or  biologics  and will be  evaluated in a series of in
vitro, non-clinical and human clinical testing.  Typically,  clinical testing is
performed  in three  phases to further  evaluate  the safety and efficacy of the
drug.  In Phase I, a product is tested in a small  number of patients  primarily
for safety at one or more dosages.  Phase II  evaluates,  in addition to safety,
the efficacy of the product against particular  diseases in a patient population
that is  generally  somewhat  larger  than Phase I.  Clinical  trials of certain
diagnostic and cancer therapeutic agents frequently combine Phase I and Phase II
into a single  Phase I/II study.  In Phase III,  the product is  evaluated  in a
larger  patient  population  sufficient  to generate  data to support a claim of
safety and  efficacy  within  the  meaning  of the Food Drug and  Cosmetic  Act.
Permission by the FDA must be obtained before clinical  testing can be initiated
within the United  States.  This  permission  is  obtained by  submission  of an
Investigational  New Drug application which typically includes the results of in
vitro and  non-clinical  testing and any previous human testing done  elsewhere.
The FDA has 30  days to  review  the  information  submitted  and  makes a final
decision whether to permit clinical testing with the drug or biologic.  However,
this process can take longer if the FDA raises  questions or asks for additional
information  regarding  the  Investigational  New Drug  application.  A  similar
procedure applies to medical device and diagnostic products.

After completion of in vitro,  non-clinical and clinical testing,  authorization
to market a drug or biologic  must be granted by FDA. The FDA grants  permission
to market through the review and approval of either a New Drug  Application  for
drugs or a  Biologic  License  Application  for  biologics.  These  applications
provide  detailed  information  on the results of the safety and efficacy of the
drug  conducted  both  in  animals  and  humans.  Additionally,  information  is
submitted describing the facilities and procedures for manufacturing the drug or
biologic.

The  Prescription  Drug  User  Fee Act  and  subsequently,  the  Food  and  Drug
Administration  Modernization  Act of 1997 have established  application  review
times for both New Drug Applications and Biologic License Applications.  For the
majority of new drugs and biologics,  FDA is to review and make a recommendation
for approval within 12 months. For drugs and biologics designated as "priority,"
the review time is six months. This review process,  however, can and frequently
does exceed these targets.

Once a drug or biologic is approved, we are required to maintain approval status
of the products by providing certain updated safety and efficacy  information at
specified  intervals.  Additionally,  we are required to meet other requirements
specified  by the Food Drug and Cosmetic  Act  including  but not limited to the
manufacture of products,  labeling and promotional materials and the maintenance
of other records and reports.  Failure to comply with these  requirements or the
occurrence of unanticipated  safety effects from the products during  commercial
marketing,  could lead to the need for product recall,  or FDA initiated action,
which  could  delay  further  marketing  until the  products  are  brought  into
compliance.  Similar laws and regulations  apply in most foreign countries where
these products are likely to be marketed.

Orphan Drug Act

The Orphan  Drug Act is  intended  to provide  incentives  to  manufacturers  to
develop and market drugs for rare  diseases or conditions  affecting  fewer than
200,000  persons in the United States at the time of application for orphan drug
designation.  A drug that  receives  orphan  drug  designation  and is the first
product to  receive  FDA  marketing  approval  for a  particular  indication  is
entitled to orphan drug status, a seven-year  exclusive  marketing period in the
United States for that  indication.  Clinical  testing  requirements  for orphan
drugs are the same as those for  products  that have not  received  orphan  drug
designation.  OncoScint  CR/OV has received an orphan drug  designation  for the
detection  of  ovarian  carcinoma.  Under the  Orphan  Drug Act,  the FDA cannot
approve any  application  by another  party to market an  identical  product for
treatment  of an  identical  indication  unless the party has a license from the
holder of orphan drug  status,  or the holder of orphan drug status is unable to
assure an adequate supply of the drug. However, a drug that is considered by FDA
to be  different  from a  particular  orphan drug is not barred from sale in the
United  States  during the  seven-year  exclusive  marketing  period  even if it
receives marketing approval for the same product claim.

                                     -21-
<PAGE>

Fraud and Abuse

We are subject to various federal and state laws pertaining to health care fraud
and  abuse,  including  anti-kickback  laws and  physician  self-referral  laws.
Violations  of these laws are  punishable  by criminal  and/or civil  sanctions,
including,  in some instances,  imprisonment and exclusion from participation in
federal and state  health care  programs,  including  Medicare,  Medicaid and VA
health programs.  Because of the far-reaching nature of these laws, there can be
no assurance that the  occurrence of one or more  violations of these laws would
not result in a material  adverse effect on our financial  condition and results
of operations.

Anti-Kickback   Laws.   Our   operations   are  subject  to  federal  and  state
anti-kickback  laws.  Certain  provisions  of the Social  Security Act, that are
commonly known  collectively  as the Medicare Fraud and Abuse Statute,  prohibit
entities, such as us, from offering, paying, soliciting or receiving any form of
remuneration  in return for the  referral of Medicare  or state  health  program
patients or patient  care  opportunities,  or in return for the  recommendation,
arrangement,  purchase,  lease or order of items or services that are covered by
Medicare or state health  programs.  Violation  of the Medicare  Fraud and Abuse
Statute  is a  felony,  punishable  by fines up to  $25,000  per  violation  and
imprisonment  for up to five years.  In addition,  the  Department of Health and
Human  Services may impose  civil  penalties of up to $50,000 per act plus three
times the  remuneration  offered and exclude  violators  from  participation  in
Medicare or state health programs. Many states have adopted similar prohibitions
against payments  intended to induce referrals to Medicaid and other third party
payor patients.

Physician Self-Referral Laws. We are also subject to federal and state physician
self-referral  laws. Federal physician  self-referral  legislation (known as the
Stark law) prohibits,  subject to certain exceptions, a physician or a member of
his immediate family from referring  Medicare or Medicaid  patients to an entity
providing  "designated  health services" in which the physician has an ownership
or  investment  interest,  or  with  which  the  physician  has  entered  into a
compensation arrangement.  The Stark law also prohibits the entity receiving the
referral  from  billing  any good or service  furnished  pursuant to an unlawful
referral. The penalties for violations include a prohibition on payment by these
government programs and civil penalties of as much as $15,000 for each violative
referral and $100,000 for  participation  in a  circumvention  scheme."  Various
state laws also contain similar provisions and penalties.

False Claims Laws.  Under  separate  statutes,  submission of claims for payment
that are "not provided as claimed" may lead to civil money  penalties,  criminal
fines  and  imprisonment,  and/or  exclusion  from  participation  in  Medicare,
Medicaid and other federally  funded state health  programs.  These false claims
statutes  include the Federal False Claims Act, which allows any person to bring
suit  alleging  false  or  fraudulent  Medicare  or  Medicaid  claims  or  other
violations  of the statute and to share in any amounts paid by the entity to the
government in fines or settlement.  Such suits,  known as qui tam actions,  have
increased  significantly  in recent years causing greater numbers of health care
companies to have to defend a false claim action,  pay fines or be excluded from
the  Medicare,  Medicaid or other  federal or state  health  care  programs as a
result of any investigation arising out of such action.

Other regulations

In addition to  regulations  enforced by FDA, we are also subject to  regulation
under the state and local  authorities  and other federal  statutes and agencies
including the Occupational  Safety and Health Act, the Environmental  Protection
Act, the Toxic  Substances  Control Act, the Resource  Conservation and Recovery
Act and the Nuclear Regulatory Commission.

Foreign regulatory approval

The regulatory  approval  process in Europe has changed over the past few years.
There are two regulatory  approval processes in Europe for products developed by
us.  Beginning in 1995,  the  centralized  procedure  became  mandatory  for all
biotechnology  products.  Under  this  regulatory  scheme,  the  application  is
reviewed by two  scientific  project  leaders  referred to as the rapporteur and
co-rapporteur,  respectively.  Their roles are to prepare  assessment reports of
safety and efficacy and for  recommending  the approval for full European  Union
marketing.

The second regulatory scheme,  referred to as the Mutual Recognition  Procedure,
is a process  whereby a  product's  national  registration  in one member  state
within the European  Union may be "mutually  recognized"  by other member states
within the European Union.

                                      -22-

<PAGE>


Substantial requirements, comparable in many respects to those imposed under the
Food Drug and  Cosmetic  Act,  will  have to be met  before  commercial  sale is
permissible in most countries. There can be no assurance, however, as to whether
or when  governmental  approvals,  other than those  already  obtained,  will be
obtained or as to the terms or scope of those approvals.

HEALTH CARE REIMBURSEMENT

Our business,  financial condition and results of operations will continue to be
affected  by the efforts of  governments  and  third-party  payors to contain or
reduce the costs of healthcare  through  various means.  There have been, and we
expect that there will continue to be, federal and state  proposals to implement
government  control of pricing and  profitability  of therapeutic and diagnostic
imaging agents. In addition, an increasing emphasis on managed care has and will
continue to increase the pressure on pricing of these products.  While we cannot
predict  whether  legislative  or  regulatory  proposals  will be adopted or the
effects  proposals  or  managed  care  efforts  may  have on our  business,  the
announcement  of proposals and the adoption of proposals or efforts could have a
material  adverse  effect on our  business,  financial  condition and results of
operations.  Further, to the extent proposals or efforts have a material adverse
effect on other  companies  that are our  prospective  corporate  partners,  our
ability  to  establish  strategic  alliances  may be  materially  and  adversely
affected.  In certain  foreign  markets,  the pricing and  profitability  of our
products generally are subject to government controls.

Sales of our products depend in part on the availability of reimbursement to the
consumer from third-party  payors,  including  Medicare,  Medicaid,  and private
health insurance  plans.  Third-party  payors are  increasingly  challenging the
prices  charged for medical  products and services.  To the extent we succeed in
bringing  products to market,  we cannot assure you that these  products will be
considered  cost-effective and that reimbursement to consumers will be available
or  sufficient  to  allow  us to  sell  our  products  on a  competitive  basis.
Reimbursement  by a  third-party  payor  may  depend  on a  number  of  factors,
including the payor's  determination that our products are clinically useful and
cost-effective,  medically  necessary and not  experimental or  investigational.
Since reimbursement  approval is required from each payor individually,  seeking
approvals can be a time  consuming and costly  process which could require us to
provide supporting scientific,  clinical and cost-effectiveness data for the use
of our products to each payor separately.  If we or our collaborators are unable
to secure adequate third party  reimbursement  for our products,  there would be
material  adverse  effect on its  business,  financial  condition and results of
operations.

CUSTOMERS

During the year ended  December 31, 2001, we received 63% of our total  revenues
from four  customers,  Berlex  Laboratories,  Inc.  (20%) and the  radiopharmacy
chains of  Mallinckrodt  Medical,  Inc.  (20%),  Medi-Physics  (12%) and  Syncor
International Corporation (11%).

EMPLOYEES

As of March 1, 2002, we employed 74 persons,  73 of which are employed full-time
and 1  part-time.  Of such 74  persons,  26 were in our  proteomics  subsidiary,
AxCell, 1 in regulatory,  5 in clinical  activities,  15 in  administration  and
management,  and 27 in  marketing  and  sales.  We  believe  that we  have  been
successful  in  attracting  skilled  and  experienced  employees.  None  of  our
employees is covered by a collective bargaining agreement.  All of our employees
have  executed  confidentiality  agreements.  We  consider  relations  with  our
employees to be excellent.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

Investing  in the  Company's  Common Stock  involves a high degree of risk.  You
should carefully consider the following risks and uncertainties  described below
together with the other  information  included or  incorporated  by reference in
this Annual  Report on Form 10-K in your decision as to whether to invest in our
Common Stock. If any of the following risks or uncertainties actually occur, our
business,  financial  condition and operating results could be significantly and
adversely  affected.  If that  happens,  the  price of our  Common  Stock  could
decline, and you could lose all or part of your investment.

We Have A History Of Operating  Losses And An Accumulated  Deficit And Expect To
Incur Losses In The Future.

We have a history of operating losses since our inception.  We had a net loss of
$12.1  million for the year ended  December  31, 2001 We had a net loss of $27.3
million for the year ended December 31, 2000 which included  one-time,  non-cash
charges of $13.1 million for the  acquisition  of product  candidate  rights and
$4.3 million for the  cumulative  effect of an accounting  change  following the
adoption of Securities and Exchange  Commission  Staff  Accounting  Bulletin No.
101. We had net income of $729,000  for the year ended  December  31, 1999 which

                                     -23-
<PAGE>

included a $3.3 million  non-operating  gain. We had an  accumulated  deficit of
$340.7  million as of December 31, 2001.  In order to develop and  commercialize
our  technologies,  particularly  our  functional  proteomics  program  and  our
prostate specific membrane antigen, or PSMA, technology, and expand our oncology
products, we expect to incur significant increases in our expenses over the next
several  years.  As a result,  we may need to  generate  significant  additional
revenue to become profitable.

Our ability to generate and sustain  significant  additional revenues or achieve
profitability  will depend upon the factors  discussed  elsewhere  in this "Risk
Factors"  Section,  as well as numerous  other  factors  outside of our control,
including:

     -    development  of  competing  products  that are more  effective or less
          costly than ours;

     -    our  ability  to  develop  and  commercialize  our  own  products  and
          technologies; and

     -    our ability to achieve  increased sales for our existing  products and
          sales for any new products.

As a result, we may never be able to generate or sustain significant  additional
revenue or achieve profitability.

We Are Heavily  Dependent On Market  Acceptance  Of  ProstaScint,  Quadramet and
BrachySeed For Near-Term Revenues.

We expect  ProstaScint and Quadramet to account for a significant  percentage of
our product-related revenues in the near future. For the year ended December 31,
2001, revenues from ProstaScint and Quadramet accounted for approximately 89% of
our product related revenues.

Because these products contribute the majority of our product-related  revenues,
our business,  financial  condition  and results of  operations  depend on their
acceptance as safe, effective and cost-efficient alternatives to other available
treatment and diagnostic protocols by the medical community, including:

     -    health care providers, such as hospitals and physicians; and

     -    third-party payors,  including Medicare,  Medicaid,  private insurance
          carriers and health maintenance organizations.

Our  customers,   including  technologists  and  physicians,  must  successfully
complete our Partners in  Excellence  Program,  or PIE  Program,  a  proprietary
training program designed to promote the correct  acquisition and interpretation
of  ProstaScint  images.  This  product is  technique  dependent  and requires a
learning  commitment on the part of users.  We cannot assure you that additional
technologist's and physicians will make this commitment or otherwise accept this
product as part of their treatment practices.

Berlex  Laboratories,  Inc.  markets  Quadramet in the United States  through an
agreement with us entered into in October 1998. We cannot assure you that Berlex
will be able to successfully market Quadramet or that this agreement will result
in  significant  revenues  for us.  We  recently  obtained  marketing  rights to
Quadramet in Canada,  but have not yet implemented a selling program.  We cannot
assure you that Quadramet can be marketed effectively in Canada, or that it will
contribute significantly to our revenues.

We cannot assure you that Quadramet will be approved for additional indications,
due to  uncertainty  as to  efficacy  or safety for other  purposes,  regulatory
obstacles and physician preferences for existing or competing practices.

Accordingly, we cannot assure you that ProstaScint, Quadramet or BrachySeed will
achieve  market  acceptance  on a  timely  basis,  or at  all.  If  ProstaScint,
Quadramet or BrachySeed do not achieve broader market acceptance,  we may not be
able to generate sufficient revenue to become profitable.

Our Functional Proteomics Program Is At An Early Stage Of Development.

We are developing a functional  proteomics program. This technology involves new
approaches to drug research and development and remains  commercially  unproven.
Our technology and  development  focus is primarily  directed toward offering an
infrastructure  to companies for the  development of drugs to treat a variety of
complex human diseases. There is limited understanding generally relating to the
role of proteins in  diseases,  and few  products  based on protein  interaction
discoveries  have been  developed  and  commercialized.  Even if our  proteomics

                                     -24-
<PAGE>

program is successful in identifying and validating biological targets, there is
no certainty that we or our customers  will be able to develop or  commercialize
products to improve  human health.  We have  developed and intend to continue to
develop a proteomics  program.  This technology  involves new approaches to drug
research and development and remains commercially  unproven.  Our technology and
development  focus is primarily  directed toward offering an  infrastructure  to
companies  for the  development  of drugs to treat a variety  of  complex  human
diseases.  There is  limited  understanding  generally  relating  to the role of
proteins in diseases, and few products based on protein interaction  discoveries
have been  developed  and  commercialized.  Even if our  proteomics  program  is
successful  in  identifying  and  validating  biological  targets,  there  is no
certainty  that we or our  customers  will be able to develop  or  commercialize
products to improve human health.

Our  technology  program  for  proteomics  is  still  in  the  early  stages  of
development.  We may not be able to populate our ProChart with  information that
is useful to  potential  customers in a timely  manner.  Even if we complete and
develop  successfully  our  proteomics  technology,  the  technology  may not be
accepted by, or be useful to, our potential customers.

In  addition,  the  success of our  proteomics  technology  will depend upon our
ability to use software  tools to generate data that relates  protein  signaling
pathways to a variety of other  bioinformatic data. Because of the complexity of
this  data,  we may not be able to detect  and  remedy  any  design  defects  or
software errors in our existing or future technologies, including databases.

We  may  not  be  successful  in  addressing  or  mitigating   these  risks  and
uncertainties,  and, if we are not,  our  business  could be  significantly  and
adversely affected.

There Is A Limited Market For Our Functional Potential Proteomics Products

Due to the specialized nature and anticipated cost of our proteomics  technology
and services,  there are a limited number of  pharmaceutical  and  biotechnology
companies that are potential customers.  In addition,  demand for our functional
proteomics technology and services is limited because:

     -    our potential customers may decide to conduct in-house research rather
          than subscribe to our ProChart database;

     -    our competitors may offer similar services at competitive prices;

     -    we may  not  be  able  to  service  satisfactorily  the  needs  of our
          potential or actual customers;

     -    others  may  publicly  disclose  or  patent  proprietary   information
          contained in our ProChart  (including  information  related to protein
          signaling  pathways  or target  candidates)  or  relating  to prostate
          antigens or antibodies; and

     -    technological  innovations  may be  discovered  that are more advanced
          than those used by or available to us.

We  may  not  be  successful  in  addressing  or  mitigating   these  risks  and
uncertainties,  and, if we are not,  our  business  could be  significantly  and
adversely affected.

We Have Experienced Fluctuating Results Of Operations.

Our results of operations  have  fluctuated on an annual and quarterly basis and
may fluctuate  significantly  from period to period in the future, due to, among
other factors:

     -    variations in revenue from sales of and royalties from our products;

     -    timing of  regulatory  approvals  and other  regulatory  announcements
          relating to our products;

     -    variations in our marketing, manufacturing and distribution channels;

     -    timing of the acquisition and successful  integration of complementary
          products and technologies;

     -    timing of new product  announcements  and  introductions by us and our
          competitors; and

                                     -25-
<PAGE>

     -    product obsolescence resulting from new product introductions by us or
          our competitors.

Many of these  factors  are  outside  our  control.  Due to one or more of these
factors, our results of operations may fall below the expectations of securities
analysts and  investors in one or more future  quarters.  If this  happens,  the
market price of our Common Stock could decline.

We May Need To Raise Additional Capital Which May Not Be Available.

We have  incurred  negative  cash  flows from  operations  since  inception.  We
expended, and will need to continue to expend, substantial funds to complete our
planned product development efforts, including our proteomics and PSMA programs.
Our future capital  requirements  and the adequacy of our available funds depend
on many factors, including:

     -    successful commercialization of our products;

     -    acquisition of complementary products and technologies;

     -    magnitude, scope and results of our product development efforts;

     -    progress of preclinical studies and clinical trials;

     -    progress toward regulatory approval for our products;

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

     -    competing technological and market developments; and

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

We may raise additional capital through public or private equity offerings, debt
financings or additional  collaborations and licensing arrangements.  Additional
financing may not be available to us when needed,  or, if available,  we may not
be able to obtain financing on terms favorable to us or our stockholders.  If we
raise additional capital by issuing equity securities,  the issuance will result
in ownership dilution to our stockholders.  If we raise additional funds through
collaborations  and  licensing  arrangements,  we may be required to  relinquish
rights to certain of our technologies or product candidates or to grant licenses
on unfavorable  terms. If we relinquish  rights or grant licenses on unfavorable
terms,  we may not be able to develop  or market  products  in a manner  that is
profitable  to us. If adequate  funds are not  available,  we may not be able to
conduct  research  activities,  preclinical  studies,  clinical  trials or other
activities  relating to the  successful  commercialization  of our products on a
timely  basis,   if  at  all,  with  the  result  that  our  business  could  be
significantly and adversely affected.

Our  Products,   Generally,   Are  In  The  Early  Stages  Of  Development   And
Commercialization  And We May Never  Achieve The Revenue  Goals Set Forth In Our
Business Plan.

We began operations in 1980 and have been engaged primarily in research directed
toward the development,  commercialization  and marketing of products to improve
diagnosis  and  treatment of cancer and other  diseases.  In December  1992,  we
introduced for commercial use our OncoScint  imaging agent.  In October 1996, we
introduced for commercial use our  ProstaScint  imaging agent. In March 1997, we
introduced  for commercial use our Quadramet  therapeutic  product.  In 2001, we
launched BrachySeed. These products have not yet achieved significant commercial
success.  In 1998, we undertook a  restructuring  to focus on the development of
our PSMA and proteomics  technologies as well as the marketing of these existing
products.

Our  PSMA  and  proteomics  technologies  are  still  in  the  early  stages  of
development.   We  have  only  recently  begun  to  incorporate  our  proteomics
technology  into  commercialized  products.  We may be  unable  to  continue  to
successfully develop or commercialize these products and technologies.


                                      -26-
<PAGE>


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

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

     -    to ensure that our products are safe and effective;

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

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

     -    to develop a sufficient market for our products; and

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

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

Our PSMA Product Development Program Is Novel And, Consequently,
Inherently Risky.

We are subject to the risks of failure  inherent in the  development  of product
candidates based on new technologies, including our PSMA technology. These risks
include the possibility that:

     -    the technologies we use will not be effective;

     -    our product candidates will be unsafe;

     -    our product  candidates will fail to receive the necessary  regulatory
          approvals;

     -    the product candidates will be hard to manufacture on a large scale or
          will be uneconomical to market; and

     -    we will not successfully overcome  technological  challenges presented
          by our potential new products.

Our  objectives  include  developing  our  PSMA  technology  into  novel  cancer
therapeutics,  including a cancer  vaccine.  To our  knowledge,  no  therapeutic
cancer vaccine has been  demonstrated  effective or approved for marketing.  Our
other research and development  programs  involve  similarly novel approaches to
human  therapeutics.  Consequently,  there is no  precedent  for the  successful
commercialization  of therapeutic  products based on our PSMA  technologies.  We
cannot assure you that any products will be successfully developed from our PSMA
technology.  If we fail to develop such products for the reasons set forth above
or for any other  reason,  our business  could be  significantly  and  adversely
affected.

All of Our Potential  Oncology  Products Will Be Subject To The Risks Of Failure
Inherent In The  Development Of Diagnostic Or Therapeutic  Products Based On New
Technologies.

Product  development  for cancer  treatment  involves a high degree of risk.  We
cannot assure you that the product  candidates we develop,  pursue or offer will
prove to be safe and effective, will receive the necessary regulatory approvals,
will not be precluded by proprietary  rights of third parties or will ultimately
achieve market  acceptance.  These product  candidates will require  substantial
additional investment,  laboratory development,  clinical testing and regulatory
approvals  prior to their  commercialization.  We cannot assure you that we will
not  experience   difficulties  that  could  delay  or  prevent  the  successful
development, introduction and marketing of new products.

Before we obtain  regulatory  approvals  for the  commercial  sale of any of our
products under development,  we must demonstrate through preclinical studies and
clinical  trials that the product is safe and efficacious for use in each target
indication.  The results from preclinical  studies and early clinical trials may
not be predictive of results that will be obtained in  large-scale  testing.  We
cannot  assure you that our  clinical  trials  will  demonstrate  the safety and
efficacy  of any  products or will result in  marketable  products.  A number of
companies in the biotechnology  industry have suffered  significant  setbacks in
advanced  clinical  trials,  even after  promising  results  in earlier  trials.
Clinical trials or marketing of any potential diagnostic or therapeutic products

                                     -27-
<PAGE>

may expose us to liability claims for the use of these diagnostic or therapeutic
products.  We may  not be  able  to  maintain  product  liability  insurance  or
sufficient  coverage may not be available at a reasonable cost. In addition,  as
we develop diagnostic or therapeutic products  internally,  we will have to make
significant  investments  in  diagnostic  or  therapeutic  product  development,
marketing,  sales  and  regulatory  compliance  resources.  We will also have to
establish or contract for the  manufacture  of products,  including  supplies of
drugs used in clinical trials, under the current Good Manufacturing Practices of
the FDA. We also cannot assure you that product issues will not arise  following
successful clinical trials and FDA approval.

The rate of  completion  of clinical  trials also depends on the rate of patient
enrollment.  Patient enrollment  depends on many factors,  including the size of
the patient population, the nature of the protocol, the proximity of patients to
clinical  sites and the  eligibility  criteria for the study.  Delays in planned
patient enrollment may result in increased costs and delays,  which could have a
harmful effect on our ability to develop the products in our pipeline. If we are
unable to develop and  commercialize  products on a timely  basis or at all, our
business could be significantly and adversely affected.

Competition In Our Field Is Intense And Likely To Increase.

We face, and will continue to face, intense  competition from one or more of the
following entities:

     -    pharmaceutical companies;

     -    biotechnology companies;

     -    bioinformatics companies;

     -    diagnostic companies;

     -    academic and research institutions; and

     -    government agencies.

All of our  lines of  business  are  subject  to  significant  competition  from
organizations  that are pursuing  technologies and products that are the same as
or similar to our technology and products.  Many of the organizations  competing
with us have greater  capital  resources,  research and  development  staffs and
facilities and marketing capabilities.

Before we recover  development  expenses for our products and technologies,  the
products  or  technologies  may  become  obsolete  as a result of  technological
developments  by us or others.  Our products  could also be made obsolete by new
technologies  which are less expensive or more effective.  We may not be able to
make the enhancements to our technology  necessary to compete  successfully with
newly  emerging  technologies  and  failure  to do so  could  significantly  and
adversely affect our business.

We Rely Heavily On Our Collaborative Partners.

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

     -    license  from  The Dow  Chemical  Company  relating  to the  Quadramet
          technology;

     -    sub-license  and marketing  agreement with Berlex  Laboratories,  Inc.
          relating to the  Quadramet  technology  which we licensed from The Dow
          Chemical Company;

     -    agreement for  manufacture of Quadramet by The DuPont  Pharmaceuticals
          Company  (formerly  the  radiopharmaceuticals  division  of The DuPont
          Merck Company);

     -    marketing  and platform  development  agreement  with  InforMax,  Inc.
          related to our proteomics program;

     -    joint venture with Progenics  Pharmaceuticals  for the  development of
          PSMA for in vivo immunotherapy for prostate and other cancers;

                                     -28-
<PAGE>

     -    licensing  agreement with Molecular  Staging for technology to be used
          in  developing  in vitro  diagnostic  tests  using  PSMA and  prostate
          specific antigen, or PSA;

     -    marketing and distribution  agreement with Draxis Health, Inc. and its
          subsidiary, Draximage, Inc. to market and distribute BrachySeed; and

     -    marketing, license and supply agreements with Advanced Magnetics, Inc.
          related to our oncology product line for products currently subject to
          regulatory approval.

Because our  collaborative  partners are  responsible  for certain of our sales,
marketing,  manufacturing  and  distribution  activities,  these  activities are
outside our direct control.  We cannot assure you that our partners will perform
their  obligations  under  these  agreements  with  us.  In the  event  that our
collaborative  partners  do not  successfully  market and sell our  products  or
breach  their  obligations  under  our  agreements,  our  products  may  not  be
commercially successful,  any success may be delayed and new product development
could be inhibited with the result that our business could be significantly  and
adversely affected.

Our Business  Could Be Harmed If Our  Collaborative  Arrangements  Expire Or Are
Terminated Early.

We cannot assure you that we will be able to maintain our existing collaborative
arrangements.  If they expire or are terminated,  we cannot assure you that they
will be renewed or that new arrangements  will be available on acceptable terms,
if at all.  In  addition,  we cannot  assure  you that any new  arrangements  or
renewals of existing  arrangements  will be successful,  that the parties to any
new or  renewed  agreements  will  perform  adequately  or that  any  former  or
potential collaborators will not compete with us.

We cannot assure you that our existing or future collaborations will lead to the
development of product  candidates or technologies  with  commercial  potential,
that we will be able to obtain  proprietary  rights or licenses for  proprietary
rights for our product  candidates or technologies  developed in connection with
these  arrangements  or that we will be able to ensure  the  confidentiality  of
proprietary rights and information developed in such arrangements or prevent the
public disclosure thereof.

The  Termination  Of One Or More License  Agreements  That Are  Important In The
Manufacture  Of Our Current  Products And New Product  Research And  Development
Activities Would Harm Our Business.

We are a  party  to  license  agreements  under  which  we  have  rights  to use
technologies  owned by other companies in the manufacture of our products and in
our  proprietary  research,  development  and  testing  processes.  We  are  the
exclusive  licensee  of  certain  patents  and patent  applications  held by the
University of North Carolina at Chapel Hill covering part of the technology used
in the proteomics program and of certain patents and patent applications held by
the Memorial  Sloan-Kettering  Institute  covering PSMA. We also depend upon the
enforceability  of our license  with The Dow  Chemical  Company  with respect to
Quadramet. If the licenses were terminated,  we may not be able to find suitable
alternatives to this technology on a timely basis or on reasonable  terms, if at
all. The loss of the right to use these technologies that we have licensed would
significantly and adversely affect our business.

We Have Limited Sales, Marketing And Distribution Capabilities For Our Products.

We have only recently established a sales force and have limited internal sales,
marketing and distribution  capabilities  for our products.  We depend on Berlex
Laboratories,  Inc. for the sale, marketing and distribution of Quadramet in the
United States. In locations outside the United States, we have not established a
selling presence.  If we are unable to establish and maintain significant sales,
marketing and distribution  efforts,  either internally or through  arrangements
with third parties, our business may be significantly and adversely affected.

There Are Risks Associated With The Manufacture And Supply Of Our Products.

If we are to be successful,  our products will have to be  manufactured  through
third-party  manufacturers  in compliance  with regulatory  requirements  and at
costs acceptable to us. We cannot assure you that we will be able to arrange for
the  manufacture of our products on  commercially  reasonable  terms.  If we are
unable to  successfully  arrange for the manufacture of our products and product
candidates,  we will not be able to successfully  commercialize our products and
our business will be significantly and adversely affected.

                                      -29-
<PAGE>

ProstaScint   and  OncoScint   CR/OV  are   manufactured  at  a  cGMP  compliant
manufacturing  facility  operated by Purdue.  We have access to the facility for
continued  manufacturing  of these  products  until January 2002. We expect that
this facility will allow us to meet our projected  production  requirements  for
ProstaScint and OncoScint CR/OV in the short term. We entered into a Development
and  Manufacturing  Agreement  with  DSM  which  we  intend  would  replace  the
arrangement  with Purdue with respect to ProtaScint and OncoScint CR/OV prior to
January  2002.  Notwithstanding  the parties  obligations  to perform  under the
agreement with DSM or to negotiate a supply  agreement in good faith,  we cannot
be certain that DSM will  satisfactorily  perform its obligations  thereunder or
that the parties  will be able to negotiate a supply  agreement on  commercially
reasonable  terms,  if at all.  Our  failure  to  negotiate  a long term  supply
agreement on commercially  reasonable  terms will have a material adverse effect
on our business, financial condition and results of operations.

Quadramet is  manufactured  by DuPont  pursuant to an agreement with both Berlex
and Cytogen. Some components of Quadramet,  particularly  Samarium153 and EDTMP,
are  provided  to  DuPont  by  outside  suppliers.  Due  to  radioactive  decay,
Samarium153 must be produced on a weekly basis.  DuPont obtains its requirements
for Samarium153 from one supplier.  Alternative sources for these components may
not be readily available.  If DuPont cannot obtain sufficient  quantities of the
components on commercially  reasonable terms, or in a timely manner, it would be
unable to manufacture Quadramet on a timely and cost-effective basis which could
have a material adverse effect on our business,  financial condition and results
of operations.

We rely on Draxis as the sole supplier of  BrachySeed.  If Draxis fails to or is
unable to timely  supply  BrachySeed,  we could  experience  a material  adverse
effect on our business, financial condition and results of operations.

We and our  third-party  manufacturers  are required to adhere to United  States
Food & Drug  Administration  regulations  setting forth requirements for current
Good  Manufacturing  Practices,  or  cGMP,  and  similar  regulations  in  other
countries,   which  include   extensive   testing,   control  and  documentation
requirements.  Ongoing  compliance  with  cGMP,  labeling  and other  applicable
regulatory  requirements are monitored  through periodic  inspections and market
surveillance by state and federal agencies, including the FDA, and by comparable
agencies in other countries.  Failure of our third-party  manufacturers or us to
comply with  applicable  regulations  could result in sanctions being imposed on
us, including fines, injunctions,  civil penalties, failure of the government to
grant premarket clearance or premarket approval of drugs, delays,  suspension or
withdrawal of approvals, seizures or recalls of products, operating restrictions
and criminal  prosecutions any of which could significantly and adversely affect
our business.

Failure Of Consumers To Obtain Adequate  Reimbursement  From Third-Party  Payors
Could Limit Market Acceptance And Affect Pricing Of Our Products.

Our business,  financial condition and results of operations will continue to be
affected by the efforts of governments and other  third-party  payors to contain
or reduce the costs of  healthcare.  There have been,  and we expect  that there
will  continue  to be, a number of  federal  and state  proposals  to  implement
government  control of pricing and  profitability  of therapeutic and diagnostic
imaging  agents such as our products.  In addition,  an emphasis on managed care
increases  possible  pressure  on  pricing  of these  products.  While we cannot
predict whether these  legislative or regulatory  proposals will be adopted,  or
the effects  these  proposals or managed care efforts may have on our  business,
the  announcement  of these  proposals  and the  adoption of these  proposals or
efforts  could affect our stock price or our  business.  Further,  to the extent
these  proposals or efforts have an adverse  effect on other  companies that are
our prospective corporate partners, our ability to establish necessary strategic
alliances may be harmed.

Sales of our  products  depend in part on  reimbursement  to the  consumer  from
third-party payors,  including  Medicare,  Medicaid and private health insurance
plans.  Third-party  payors are increasingly  challenging the prices charged for
medical  products and  services.  We cannot assure you that our products will be
considered  cost-effective  and that reimbursement to consumers will continue to
be  available,  or will be  sufficient  to allow us to sell  our  products  on a
competitive  basis.  Approval of our products for reimbursement by a third-party
payor may depend on a number of factors,  including  the  payor's  determination
that our products are clinically useful and cost-effective,  medically necessary
and not  experimental or  investigational.  Reimbursement  is determined by each
payor individually and in specific cases. The reimbursement  process can be time
consuming.  If we  cannot  secure  adequate  third-party  reimbursement  for our
products, our business could be significantly and adversely affected.

                                     -30-
<PAGE>

If We Are Unable To Comply With Applicable Governmental Regulations,  We May Not
Be Able To Continue Our Operations.

Any products tested, manufactured or distributed by us or on our behalf pursuant
to  FDA  clearances  or  approvals  are  subject  to  pervasive  and  continuing
regulation by numerous regulatory  authorities,  including primarily the FDA. We
may be slow to adapt, or we may never adapt to changes in existing  requirements
or  adoption  of new  requirements  or  policies.  Our  failure  to comply  with
regulatory  requirements  could  subject  us to  enforcement  action,  including
product seizures, recalls,  withdrawal of clearances or approvals,  restrictions
on or injunctions  against  marketing our products based on our technology,  and
civil and criminal penalties.  We cannot assure you that we will not be required
to incur  significant costs to comply with laws and regulations in the future or
that  laws or  regulations  will  not  create  an  unsustainable  burden  on our
business.

Numerous federal, state and local governmental authorities, principally the FDA,
and similar  regulatory  agencies in other  countries,  regulate the preclinical
testing,  clinical trials,  manufacture and promotion of any compounds or agents
we or our collaborative partners develop, and the manufacturing and marketing of
any resulting  drugs.  The drug  development and regulatory  approval process is
lengthy, expensive, uncertain and subject to delays.

The regulatory risks we face also include the following:

     -    any compound or agent we or our  collaborative  partners  develop must
          receive regulatory agency approval before it may be marketed as a drug
          in a particular country;

     -    the  regulatory  process,   which  includes  preclinical  testing  and
          clinical  trials of each  compound or agent in order to establish  its
          safety and  efficacy,  varies from  country to country,  can take many
          years and requires the expenditure of substantial resources;

     -    in all  circumstances,  approval of the use of  previously  unapproved
          radioisotopes in certain of our products  requires  approval of either
          the Nuclear  Regulatory  Commission  or  equivalent  state  regulatory
          agencies.  A  radioisotope  is an  unstable  form of an element  which
          undergoes  radioactive decay,  thereby emitting radiation which may be
          used, for example,  to image or destroy harmful growths or tissue.  We
          cannot  assure you that such  approvals  will be  obtained on a timely
          basis, or at all;

     -    data obtained from preclinical and clinical activities are susceptible
          to  varying  interpretations  which  could  delay,  limit  or  prevent
          regulatory agency approval; and

     -    delays  or  rejections  may  be  encountered  based  upon  changes  in
          regulatory agency policy during the period of drug development  and/or
          the  period  of  review  of  any  application  for  regulatory  agency
          approval.  These delays could  adversely  affect the  marketing of any
          products  we or our  collaborative  partners  develop,  impose  costly
          procedures upon our activities, diminish any competitive advantages we
          or our  collaborative  partners  may attain and  adversely  affect our
          ability to receive royalties.

We cannot  assure you that,  even after  this time and  expenditure,  regulatory
agency  approvals will be obtained for any compound or agent  developed by or in
collaboration with us. Moreover,  regulatory agency approval for a drug or agent
may entail  limitations  on the  indicated  uses that could limit the  potential
market for any such drug.  Furthermore,  if and when such  approval is obtained,
the marketing, manufacture,  labeling, storage and record keeping related to our
products would remain subject to extensive regulatory requirements. Discovery of
previously unknown problems with a drug, its manufacture or its manufacturer may
result in  restrictions  on such drug,  manufacture or  manufacturer,  including
withdrawal  of the drug  from the  market.  Failure  to comply  with  regulatory
requirements  could  result  in  fines,   suspension  of  regulatory  approvals,
operating restrictions and criminal prosecution.

The United States Food, Drug and Cosmetics Act requires (i) that our products be
manufactured in FDA registered  facilities subject to inspection,  and (ii) that
we  comply  with  cGMP,  which  imposes  certain  procedural  and  documentation
requirements   upon  us  and  our   manufacturing   partners   with  respect  to
manufacturing  and  quality  assurance  activities.  If we or our  manufacturing
partners  do not  comply  with cGMP we may be subject  to  sanctions,  including
fines, injunctions,  civil penalties,  recalls or seizures of products, total or
partial  suspension of production,  failure of the government to grant premarket
clearance or premarket approval for drugs, withdrawal of marketing approvals and
criminal prosecution.

                                     -31-
<PAGE>

We Could Be Negatively  Impacted By Future  Interpretation  Or Implementation Of
Federal  And State  Fraud And Abuse  Laws,  Including  Anti-kickback  Laws,  The
Federal Stark Law And Other Federal And State Anti-referral Laws.

We are subject to various federal and state laws pertaining to health care fraud
and  abuse,  including  anti-kickback  laws and  physician  self-referral  laws.
Violations  of these laws are  punishable  by criminal  and/or civil  sanctions,
including,  in some instances,  imprisonment and exclusion from participation in
federal  and state  health  care  programs,  including  Medicare,  Medicaid  and
Veterans  Administration  health  programs.  We have  not been  challenged  by a
governmental  authority  under any of these laws and believe that our operations
are in compliance with such laws. However, because of the far-reaching nature of
these laws,  we may be required to alter one or more of our  practices  to be in
compliance with these laws.  Health care fraud and abuse regulations are complex
and even minor,  inadvertent  irregularities in submissions can potentially give
rise to claims that the statute has been violated.  Any violations of these laws
could result in a material adverse effect on our business,  financial  condition
and  results  of  operations.  If  there  is a  change  in  law,  regulation  or
administrative or judicial  interpretations,  we may have to change our business
practices or our existing  business  practices  could be challenged as unlawful,
which could have a material adverse effect on our business,  financial condition
and results of operations.

We could become subject to false claims litigation under federal statutes, which
can lead to civil  money  penalties,  criminal  fines and  imprisonment,  and/or
exclusion from  participation in Medicare,  Medicaid and other federal and state
health care programs.  These false claims statutes include the False Claims Act,
which allows any person to bring suit alleging  false or fraudulent  Medicare or
Medicaid  claims or other  violations of the statute and to share in any amounts
paid by the entity to the government in fines or settlement.  Such suits,  known
as qui tam  actions,  have  increased  significantly  in  recent  years and have
increased  the risk that a health care company will have to defend a false claim
action, pay fines or be excluded from the Medicare program, Medicaid programs or
other  federal and state  health care  programs as a result of an  investigation
arising out of such action. We cannot assure you that we will not become subject
to such  litigation  or, if we are not  successful  in  defending  against  such
actions,  that  such  actions  will not have a  material  adverse  effect on our
business, financial condition and results of operations.

We Depend On Attracting And Retaining Key Personnel.

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

We have an employee  retention  agreement with our President and Chief Executive
Officer,  H. Joseph Reiser,  Ph.D.,  which provides for vesting of stock options
for the purchase of shares of our Common Stock based on continued employment and
on the achievement of performance  objectives defined by the board of directors.
We do not have similar retention agreements with its other key personnel.  If we
are unable to hire and retain personnel in key positions,  our business could be
significantly and adversely affected unless qualified replacements can be found.

Our  Business  Exposes  Us To  Potential  Liability  Claims  That May Exceed Our
Financial  Resources,  Including  Our  Insurance  Coverage,  And May Lead To The
Curtailment Or Termination Of Our Operations.

Our  business is subject to product  liability  risks  inherent in the  testing,
manufacturing  and marketing of our products.  We cannot assure you that product
liability  claims will not be  asserted  against  us, our  collaborators  or our
licensees. While we currently maintain product liability insurance in amounts we
believe are  adequate,  we cannot assure you that such coverage will be adequate
to protect us against future product  liability claims or that product liability
insurance  will be  available  to us in the  future on  commercially  reasonable
terms,  if at all.  Furthermore,  we cannot  assure  you that we will be able to
avoid significant  product liability claims and adverse publicity.  If liability
claims  against  us exceed  our  financial  resources  we may have to curtail or
terminate our operations.

Our Business Involves Environmental Risks That May Result In Liability.

We are subject to a variety of local,  state,  federal  and  foreign  government
regulations  relating to storage,  discharge,  handling,  emission,  generation,
manufacture and disposal of toxic, infectious or other hazardous substances used
to manufacture  our products.  If we fail to comply with these  regulations,  we
could be  liable  for  damages,  penalties  or other  forms of  censure  and our
business could be significantly and adversely affected.


                                     -32-
<PAGE>
Our Intellectual Property Is Difficult To Protect.

Our business and competitive positions are dependent upon our ability to protect
our  proprietary  technology.  Because  of the  substantial  length  of time and
expense  associated with  development of new products,  we, like the rest of the
biopharmaceutical  industry,  place  considerable  importance  on obtaining  and
maintaining  patent and trade secret protection for new  technologies,  products
and  processes.  We  have  filed  patent  applications  for our  technology  for
diagnostic and therapeutic products and the methods for its production and use.

The patent  positions of  pharmaceutical,  biopharmaceutical  and  biotechnology
companies,  including us, are generally  uncertain and involve complex legal and
factual questions.  Our patent applications may not protect our technologies and
products because, among other things:

     -    there is no guarantee that any of our pending patent applications will
          result in issued patents;

     -    we may  develop  additional  proprietary  technologies  that  are  not
          patentable;

     -    there is no guarantee that any patents issued to us, our collaborators
          or our  licensors  will  provide  a basis  for a  commercially  viable
          product;

     -    there  is  no  guarantee   that  any  patents  issued  to  us  or  our
          collaborators will provide us with any competitive advantage;

     -    there  is  no  guarantee   that  any  patents  issued  to  us  or  our
          collaborators  will not be challenged,  circumvented or invalidated by
          third parties; and

     -    there is no guarantee that any patents  previously issued to others or
          issued in the future will not have an adverse effect on our ability to
          do business.

In  addition,  patent  law in the  technology  fields  in  which we  operate  is
uncertain  and still  evolving,  and we cannot  assure  you as to the  degree of
protection  that will be  afforded  any  patents we are  issued or license  from
others.  Furthermore,  we cannot  assure you that others will not  independently
develop similar or alternative technologies,  duplicate any of our technologies,
or, if  patents  are  issued to us,  design  around  the  patented  technologies
developed by us. In addition,  we could incur substantial costs in litigation if
we are required to defend  ourselves  in patent suits by third  parties or if we
initiate  such suits.  We cannot  assure you that,  if  challenged  by others in
litigation, the patents we have been issued, or which have been assigned or have
been licensed from others will not be found  invalid.  We cannot assure you that
our  activities  would  not  infringe  patents  owned  by  others.  Defense  and
prosecution  of  patent  matters  can  be  expensive  and  time-consuming   and,
regardless  of  whether  the  outcome  is  favorable  to us,  can  result in the
diversion of substantial financial,  managerial and other resources.  An adverse
outcome could:

     -    subject us to significant liability to third parties;

     -    require us to cease any related  research and  development  activities
          and product sales; or

     -    require us to obtain licenses from third parties.

We cannot  assure  you that any  licenses  required  under any such  third-party
patents or proprietary rights would be made available on commercially reasonable
terms, if at all.  Moreover,  the laws of certain  countries may not protect our
proprietary  rights to the same  extent  as the laws of the  United  States.  We
cannot predict whether us or our competitors'  pending patent  applications will
result in the issuance of valid  patents which may  significantly  and adversely
affect our business.

We  Cannot  Be  Certain  That  Our  Security  Measures  Protect  Our  Unpatented
Proprietary Technology.

We also rely upon  trade  secret  protection  for some of our  confidential  and
proprietary  information that is not subject matter for which patent  protection
is available. To help protect our rights, we require all employees, consultants,
advisors and collaborators to enter into confidentiality agreements that require
disclosure,  and in most cases, assignment to us, of their ideas,  developments,
discoveries  and  inventions,  and that prohibit the disclosure of  confidential


                                     -33-
<PAGE>
information to anyone outside Cytogen or our subsidiaries. We cannot assure you,
however,  that these agreements will provide  adequate  protection for our trade
secrets,  know-how or other proprietary  information or prevent any unauthorized
use or disclosure.

We Are Currently Subject To Patent Litigation.

We are a defendant in a lawsuit filed  against us in the United  States  Federal
Court for the District of New Jersey by M. David  Goldenberg  and  Immunomedics,
Inc. This lawsuit was filed on March 16, 2000.  The  litigation  claims that our
ProstaScint  product infringes a patent  purportedly owned by Dr. Goldenberg and
licensed to Immunomedics. The patent sought to be enforced in the litigation has
now expired.  As a result, the claim, even if successful,  would not result in a
bar of the continued  sale of ProstaScint or affect any other of our products or
technology. However, given the uncertainty associated with litigation, we cannot
give any assurance that the litigation will not result in a material expenditure
to us.

If We Make Any  Acquisitions,  We Will  Incur A  Variety  Of Costs And May Never
Realize The Anticipated Benefits.

If  appropriate  opportunities  become  available,  we may  attempt  to  acquire
businesses,  technologies,  services or products that we believe are a strategic
fit with our business.  We currently  have no  commitments  or  agreements  with
respect to any  acquisitions.  If,  however,  we do undertake any transaction of
this sort, the process of integrating an acquired business,  technology, service
or product may result in operating  difficulties and expenditures and may absorb
significant  management  attention that would otherwise be available for ongoing
development  of our business.  Moreover,  we may never  realize the  anticipated
benefits of any  acquisition.  Future  acquisitions  could result in potentially
dilutive  issuances of equity  securities,  the  incurrence of debt,  contingent
liabilities  and  amortization  expenses  related to  intangible  assets.  These
factors  could  adversely   affect  our  results  of  operations  and  financial
condition, which could cause a decline in the market price of our Common Stock.

Our Stock Price Has Been And May Continue To Be Volatile, And Your Investment In
Our Stock Could Decline In Value.

The market prices for securities of biotechnology and  pharmaceutical  companies
have  historically  been highly  volatile,  and the market has from time to time
experienced  significant price and volume fluctuations that are unrelated to the
operating  performance of particular  companies.  The market price of our Common
Stock has fluctuated over a wide range and may continue to fluctuate for various
reasons, including, but not limited to, announcements concerning our competitors
or us regarding:

     -    results of clinical trials;

     -    technological innovations or new commercial products;

     -    changes in  governmental  regulation  or the status of our  regulatory
          approvals or applications;

     -    changes in earnings;

     -    changes in health care policies and practices;

     -    developments or disputes concerning proprietary rights;

     -    litigation  or  public  concern  as to  safety  of the  our  potential
          products; and

     -    changes in general market conditions.

We Have Adopted  Various  Anti-Takeover  Provisions  Which May Affect The Market
Price Of Our Common Stock.

Our Board of Directors has the authority,  without further action by the holders
of Common Stock, to issue from time to time, up to 5,400,000 shares of preferred
stock in one or more classes or series, and to fix the rights and preferences of
the  preferred  stock.  Pursuant  to these  provisions,  we have  implemented  a
stockholder  rights plan by which one preferred stock purchase right is attached
to each share of Common Stock, as a means to deter coercive takeover tactics and
to prevent an acquirer  from  gaining  control of us without  some  mechanism to
secure a fair price for all of our stockholders if an acquisition was completed.
These  rights  will be  exercisable  if a person  or group  acquires  beneficial
ownership  of 20% or more of our  Common  Stock and can be made  exercisable  by
action of our board of directors  if a person or group  commences a tender offer
which would  result in such person or group  beneficially  owning 20% or more of


                                     -34-
<PAGE>
our Common Stock.  Each right will entitle the holder to buy one  one-thousandth
of a share of a new series of our junior participating  preferred stock for $20.
If any person or group becomes the beneficial owner of 20% or more of our Common
Stock (with certain  limited  exceptions),  then each right not owned by the 20%
stockholder  will  entitle its holder to  purchase,  at the right's then current
exercise price, common shares having a market value of twice the exercise price.
In addition,  if after any person has become a 20% stockholder,  we are involved
in a merger or other business combination  transaction with another person, each
right will entitle its holder (other than the 20%  stockholder) to purchase,  at
the right's then current exercise price,  common shares of the acquiring company
having a value of twice the right's then current exercise price.

We are subject to provisions of Delaware corporate law which, subject to certain
exceptions,  will prohibit us from engaging in any "business combination" with a
person who,  together with  affiliates and  associates,  owns 15% or more of our
Common Stock for a period of three years following the date that the person came
to own 15% or more of our  Common  Stock  unless  the  business  combination  is
approved in a prescribed manner.

These   provisions  of  the   stockholder   rights  plan,  our   certificate  of
incorporation, and of Delaware law may have the effect of delaying, deterring or
preventing a change in control of Cytogen,  may  discourage  bids for our Common
Stock at a premium over market price and may adversely  affect the market price,
and the voting and other rights of the holders, of our Common Stock.

A Large Number Of Our Shares Are  Eligible  For Future Sale Which May  Adversely
Impact The Market Price Of Our Common Stock.

A large number of shares of our common stock are already  outstanding,  issuable
upon exercise of options and warrants,  or the achievement of certain milestones
under previously  completed  acquisitions and may be eligible for resale,  which
may adversely  affect the market price of our common stock.  As of March 1, 2002
we had 82,011,156  shares of common stock  outstanding,  which number of shares:
(i) incudes an  aggregate  of 2,417 shares of common stock to be issued to prior
holders of  securities  of CytoRad  Incorporated  and  Cellcor,  Inc.,  which we
acquired in 1995, upon each such holders respective exchange of such securities;
(ii)  excludes  500,000  shares  of  common  stock  previously  issued by us and
currently held in escrow pending release,  upon certain conditions,  to Advanced
Magnetics, who currently maintains voting control of such securities;  and (iii)
excludes 355,497 shares  previously issued by us and currently held for issuance
by the  custodian  of our  Employee  Stock  Purchase  Plan  to the  participants
thereunder,  in the event they elect to  purchase  such  shares.  An  additional
4,855,929  shares of common stock are issuable upon the exercise of  outstanding
stock options and an additional 393,630 shares of common stock are issuable upon
the exercise of outstanding  warrants.  Substantially all of such shares subject
to outstanding  options and warrants will, when issued upon exercise thereof, be
available  for  immediate  resale  in the  public  market  pursuant  to either a
currently effective registration statement under the Securities Act of 1933 (the
"Securities  Act"), as amended,  or pursuant to Rule 144 or Rule 701 promulgated
thereunder.  In addition,  there are 1,091,827 additional shares of common stock
reserved for future  issuance  under our current  stock options  plans,  154,363
additional  shares of common stock  reserved for issuance  under our 401(k) Plan
and 227,518  additional  shares of common stock reserved for the future issuance
under our employee  bonus plan.  All such reserved  shares have been  registered
with the  Securities  and Exchange  Commission  pursuant to currently  effective
Registration  Statements.  In addition,  there are 929,757  additional shares of
common stock,  subject to certain  adjustments,  reserved for future issuance in
connection with the issuance of a convertible  promissory  note,  having a seven
(7) year maturity, to ELAN Corporation, plc in August 1998.

In connection  with our  acquisition of Prostagen,  Inc. in June 1999, we issued
2,050,000  unregistered  shares of our common stock to the then  stockholders of
Prostagen, which shares may be sold from time to time pursuant to Rule 144 under
the Securities Act. Such stockholders  also have certain piggyback  registration
rights with  respect to these  shares of common  stock.  An  additional  950,000
shares may be issued as contingent  payment upon the happening of certain events
and up to $4.0  million  worth of Cytogen  common stock may be issued if certain
milestones  are  achieved in the  dendritic  cell  therapy and PSMA  development
programs.

In  addition,  on March 28,  2000,  we filed with the  Securities  and  Exchange
Commission  a shelf  registration  statement  on Form S-3  covering  six million
(6,000,000) shares of our common stock.  1,500,000 of such registred shares were
issued to Advanced Magnetics,  Inc. in connection with the parties entering into
a License and Marketing  Agreement in August 2000. An additional  500,000 of the
shares registered on that Form S-3 are currently being held in escrow and may be
released to Advanced  Magnetics  in the future in  accordance  with the terms of
such  License  and  Marketing  Agreement.  An  additional  902,601 of the shares
registered  on that form S-3 were  issued  to Acqua  Wellington  North  American
Equities Fund, Ltd. on September 29, 2000 in a private placement transaction. An
additional  1,276,557 of the shares  registered  on that Form S-3 were issued to
Acqua  Wellington on February 5, 2001 pursuant to an equity  financing  facility


                                     -35-
<PAGE>
with Acqua Wellington that was subsequently terminated.  An additional 1,820,000
of the shares  registered on that Form S-3 were issued to the State of Wisconsin
Investment  Board on June 19, 2001 in a private  placement  transaction.  We are
contractually  obligated  to maintain  the  effectiveness  of such  registration
statement.

On October 25, 2001,  we filed with the  Securities  and  Exchange  Commission a
shelf  registration  statement  on Form S-3  covering  ten million  (10,000,000)
shares of our common stock.  2,970,665 of such registered  shares were issued to
the State of Wisconsin Investment Board in another private placement transaction
in January 2002.

Availability  of a significant  number of additional  shares of our common stock
could depress the price of our common stock.

Because  We Do Not  Intend  to Pay Any Cash  Dividends  On Our  Shares of Common
Stock,  Our  Stockholders  Will Not Be Able to Receive a Return on Their  Shares
Unless They Sell Them.

We have never paid or declared  any cash  dividends on our Common Stock or other
securities and intend to retain any future  earnings to finance the  development
and expansion of our business. We do not anticipate paying any cash dividends on
our  Common  Stock in the  foreseeable  future.  Unless  we pay  dividends,  our
stockholders  will not be able to receive a return on their  shares  unless they
sell them.

Our Stock Price Is Highly  Volatile,  And Therefore The Value Of Your Investment
May Fluctuate Significantly.

The  market  price of our  Common  Stock  has  fluctuated  and may  continue  to
fluctuate as a result of variations in our business and our quarterly  operating
results.  These  fluctuations  may be  exaggerated  if the trading volume of our
Common  Stock is low. In addition,  the stock market in general has  experienced
dramatic price and volume fluctuations from time to time. These fluctuations may
or may not be based upon any business or operating results. Our Common Stock may
experience similar or even more dramatic price and volume fluctuations which may
continue indefinitely. Please see Item 5 herein, Market for the Company's Common
Equity and  Related  Stockholder  Matters,  for  additional  information  on the
volatility of our Common Stock.

Item 2.  Properties

We currently lease approximately  20,000 square feet of administrative  space in
Princeton, New Jersey. The lease on this space expires in August 2002. We intend
to remain in Princeton,  New Jersey for the foreseeable future and are reviewing
our lease situation.

We also lease  approximately 9,000 square feet of laboratory and office space in
Newtown,  Pennsylvania,  which is occupied by our AxCell Biosciences subsidiary,
under a lease  expiring  in 2004.  In  February  2001,  we  expanded  the AxCell
facility by amending  the lease to include  approximately  an  additional  5,000
square feet, which additional lease space will expire in July 2006.
We own  substantially all of the equipment used in our laboratories and offices.
We believe our facilities are adequate for our operations at present.

Item 3.  Legal Proceedings

On March 17,  2000,  we were  served with a  complaint  filed  against us in the
United  States  Federal  Court  for  the  District  of New  Jersey  by M.  David
Goldenberg ("Goldenberg") and Immunomedics, Inc. (collectively "Plaintiffs") The
litigation claims that our ProstaScint  product  infringes a patent  purportedly
owned by Goldenberg and licensed to  Immunomedics.  We believe that  ProstaScint
does not infringe this patent, and that the patent is invalid and unenforceable.
In addition,  we have certain rights to  indemnification  against litigation and
litigation  expenses from the inventor of technology used in ProstaScint,  which
may be offset against royalty payments on sales of ProstaScint. In addition, the
patent sought to be enforced in the litigation has now expired; as a result, the
claim even if successful would not result in an injunction barring the continued
sale of ProstaScint or affect any other of our products or technology.  However,
given the uncertainty  associated with litigation,  we cannot give any assurance
that the  litigation  could  not  result  in a  material  expenditure  to us. On
December 17, 2001, we filed a motion for summary judgment of non-infringement of
the asserted  claims of the  patent-in-suit.  The Plaintiffs have indicated that
they will file a cross-motion  for summary judgment with their opposition to our
motion.  A hearing  on these  motions  is likely to take  place in the Spring of
2002.


                                     -36-
<PAGE>
Item 4.  Submission of Matters to a Vote of Security Holders

None.


                                     -37-
<PAGE>
                                    PART II


Item 5.  Market for the Company's Common Equity and Related Stockholder Matters

Our Common Stock is traded on the NASDAQ  National  Market (the "NNM") under the
trading symbol "CYTO."

The table below sets forth the high and low bid information for our Common Stock
for each of the  calendar  quarters  indicated,  as  reported  on the NNM.  Such
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission and may not represent actual transactions.

2000                                                         High          Low
----                                                         ----          ---
First Quarter............................................  $ 21.69       $ 2.63
Second Quarter...........................................    10.56         2.00
Third Quarter............................................    11.31         5.50
Fourth Quarter...........................................     7.13         1.00

2001
----
First Quarter............................................     6.53         2.31
Second Quarter...........................................     6.09         2.19
Third Quarter............................................     5.38         1.90
Fourth Quarter...........................................     4.46         2.05

As of March 1, 2002,  there were  approximately  4,357  holders of record of the
Common  Stock and there  were  approximately  51,346  beneficial  holders of the
Common Stock.

We have  never  paid  any  cash  dividends  on our  Common  Stock  and we do not
anticipate  paying any cash  dividends  on our Common  Stock in the  foreseeable
future.  We intend to retain any future  earnings  to fund the  development  and
growth of our business. Any future determination to pay dividends will be at the
discretion of the board of directors.

On January 17, 2001, we granted 10,000 options to purchase  shares of our Common
Stock at an exercise price of $6.13, to Kevin G. LoKay,  upon his appointment to
our Board of  Directors.  Such options were granted  outside of any of our stock
option plans, and will vest in full upon the one year anniversary of the date of
grant.  We granted  such option to Mr.  LoKay in a  transaction  exempt from the
registration  requirements  of the  Securities  Act of 1933,  as  amended,  as a
transaction  by an issuer not involving any public  offering  under Section 4(2)
thereof.

On November 1 and December 1 of 2001,  we issued two warrants to purchase  7,000
and 7,000 shares of our Common  Stock,  respectively,  at an exercise  price per
share of $3.12 and $4.98, respectively, to SCO Financial Group LLC ("SCO"). Such
warrants, which vest immediately,  were issued in consideration of SCO providing
certain financial  consultancy and advisory services to us. Such warrants have a
term of three (3) years.  We granted  such  warrants to  purchase  shares of our
Common Stock in a transaction  exempt from registration under the Securities Act
of 1933,  as  amended,  as a  transaction  by an issuer not  involving  a public
offering under Section 4(2) thereof.



                                      -38-
<PAGE>

Item 6.    Selected Financial Data

The  following  selected  financial   information  has  been  derived  from  the
consolidated  financial  statements of the Company for each of the five years in
the period ended December 31, 2001,  which have been audited by Arthur  Andersen
LLP, our independent public  accountants.  The selected financial data set forth
below should be read in conjunction with the consolidated  financial statements,
including the notes thereto,  "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other information provided elsewhere in
this report.

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                             -----------------------
                                                              2001        2000        1999        1998        1997
                                                              ----        ----        ----        ----        ----
<S>                                                       <C>         <C>         <C>         <C>         <C>
Statements of Operations Data:                                (All amounts in thousands, except per share data)
Revenues:
   Product sales ........................................  $  8,692    $  7,424    $  6,971    $  8,976    $  5,252
   Royalties ............................................     2,063       2,004       1,060       1,664       3,282
   License and contract .................................       912       1,024       3,171       9,239       5,886
                                                           --------    --------    --------    --------    --------

     Total revenues .....................................    11,667      10,452      11,202      19,879      14,420
                                                           --------    --------    --------    --------    --------

Operating Expenses:
  Cost of product and contract
    manufacturing revenues ..............................     4,126       4,414       4,111      12,284       5,939
  Research and development ..............................    10,340       6,957       3,849       9,967      17,913
  Acquisition of marketing and technology rights (1) ....         -      13,241       1,214           -           -
  Selling and marketing .................................     6,314       6,126       4,210       5,103       5,492
  General and administrative ............................     4,947       4,934       3,501       7,420       6,871
  Equity loss in Targon subsidiary ......................         -           -           -       1,020       9,232
                                                           --------    --------    --------    --------    --------


     Total operating expenses ...........................    25,727      35,672      16,885      35,794      45,447
                                                           --------    --------    --------    --------    --------

     Operating loss .....................................   (14,060)    (25,220)     (5,683)    (15,915)    (31,027)

Gain on sale of laboratory and manufacturing facilities..         -           -       3,298           -           -
Gain on sale of Targon subsidiary .......................         -           -           -       2,833           -
Other income (expense) ..................................       857         611         412         (70)        315
                                                           --------    --------    --------    --------    --------

     Loss before income taxes and cumulative effect of
      accounting change .................................   (13,203)    (24,609)     (1,973)    (13,152)    (30,712)
Income tax benefit ......................................    (1,103)     (1,625)     (2,702)          -           -
                                                           --------    --------    --------    --------    --------

     Income (loss) before cumulative effect of
      accounting change .................................   (12,100)    (22,984)        729     (13,152)    (30,712)
Cumulative effect of accounting change ..................         -      (4,314)          -           -           -
                                                           --------    --------    --------    --------    --------

Net income (loss) .......................................   (12,100)   $(27,298)        729     (13,152)    (30,712)
Dividends, including deemed
 dividends on preferred stock ...........................         -           -           -        (119)     (1,352)
                                                           --------    --------    --------    --------    --------

Net income (loss) to common stockholders ................  $(12,100)   $(27,298)   $    729    $(13,271)   $(32,064)
                                                           ========    ========    ========    ========    ========

Net income (loss) per common share:
     Basic and diluted net income (loss) before
      cumulative effect of  accounting change ...........  $  (0.16)   $  (0.31)   $   0.01    $  (0.24)   $  (0.63)
     Cumulative effect of accounting change (2) .........         -       (0.06)          -           -           -
                                                           --------    --------    --------    --------    --------
     Basic and diluted net income (loss) ................  $  (0.16)   $  (0.37)   $   0.01    $  (0.24)   $  (0.63)
                                                           ========    ========    ========    ========    ========

Weighted average common shares outstanding:
     Basic ..............................................    77,783      73,337      67,179      56,419      51,134
                                                           ========    ========    ========    ========    ========

     Diluted ............................................    77,783      73,337      68,187      56,419      51,134
                                                           ========    ========    ========    ========    ========

Pro forma amounts assuming accounting
  change is applied retroactively:
   Net loss to common stockholders ......................              $(22,984)   $   (484)   $(16,373)   $(32,064)
                                                                       ========    ========    ========    ========
   Basic and diluted net loss per common share ..........              $  (0.31)   $  (0.01)   $  (0.29)   $  (0.63)
                                                                       ========    ========    ========    ========
</TABLE>
                                                              -39-
<PAGE>
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                    ------------
Consolidated Balance Sheet Data:                           2001          2000           1999          1998          1997
                                                     ---------------------------------------------------------------------
                                                                                  (in thousands)
<S>                                                    <C>           <C>            <C>           <C>            <C>
Cash, short-term investments and restricted cash...    $  11,309     $  11,993      $  12,394     $   3,015      $   7,401
Total assets.......................................       21,492        20,416         18,605        10,900         27,555
Long-term debt.....................................        2,291         2,374          2,416         2,223         10,171
Accumulated deficit................................     (340,681)     (328,581)      (301,283)     (302,012)      (288,741)
Stockholders' equity...............................       11,214         7,218         10,549           443          9,983
</TABLE>


(1)  In  August  2000,  the  Company   licensed  product  rights  from  Advanced
     Magnetics, Inc. In June 1999, the Company acquired Prostagen, Inc.
(2)  In 2000, the Company  recorded a non-cash charge for the cumulative  effect
     related to the adoption of SEC Staff Accounting  Bulletin No. 101. See Note
     1 of the Consolidated Financial Statements.













                                                            -40-
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following  discussion  contains  historical  information  as well as forward
looking statements that involve a number of risks and uncertainties.  Statements
contained or  incorporated  by reference in this Annual Report on Form 10-K that
are not based on historical facts are  "forward-looking  statements"  within the
meaning of Section  21E of the  Securities  Exchange  Act of 1934,  as  amended.
Generally,  forward  looking  statements can be identified by the use of phrases
like  "believe",  "expect",   "anticipate",   "plan",  "may",  "will",  "could",
"estimate",  "potential",  "opportunity"  and "project" and similar  terms.  The
Company's actual results could differ  materially from the Company's  historical
results of operations  and those  discussed in the forward  looking  statements.
Factors that could cause actual results to differ materially,  include,  but are
not limited to those identified under the caption  "Additional  Factors That May
Affect  Future  Results",  provided  elsewhere  in this  report.  Investors  are
cautioned not to put undue reliance on any forward looking statement.

Cautionary Statement

In addition to the risks  discussed under the caption  referred to above,  among
other factors that could cause actual results to differ materially from expected
results  are the  following:  (i) the  Company's  ability to access the  capital
markets in the near term and in the future for continued  funding its operations
including  existing  projects  and for the  pursuit  of new  projects;  (ii) the
ability to attract  and retain  personnel  needed for  business  operations  and
strategic  plans;  (iii)  the  timing  and  results  of  clinical  studies,  and
regulatory  approvals;   (iv)  market  acceptance  of  the  Company's  products,
including  programs  designed to  facilitate  use of the  products,  such as the
Partners  in  Excellence  or PIE  Program;  (v)  demonstration  over time of the
efficacy and safety of the Company's  products;  (vi) the degree of  competition
from existing or new products;  (vii) the decision by the majority of public and
private  insurance  carriers on whether to reimburse  patients for the Company's
products;  (viii) the  ability of the  Company  and its  partners to comply with
applicable governmental  regulations and changes thereto; (ix) the profitability
of its  products;  (x) the  ability to  attract,  and the  ultimate  success of,
strategic partnering arrangements,  collaborations,  and acquisition candidates;
(xi) the ability of the Company and its  partners to identify  new products as a
result of those collaborations that are capable of achieving FDA approval,  that
are  cost-effective  alternatives  to existing  products and that are ultimately
accepted  by the key users of the  product;  (xii) the success of the Company in
obtaining marketing approvals for its products in Canada and Europe;  (xiii) the
ability of the Company to protect its proprietary  technology,  trade secrets or
know-how  under the patent and other  intellectual  property  laws of the United
States and other  countries;  and (xiv) the  ability of  Advanced  Magnetics  to
satisfy  the  conditions  specified  by the FDA  regarding  approval  to  market
Combidex in the United States.

The following  discussion and analysis  should be read in  conjunction  with the
Financial  Statements and related notes thereto  contained  elsewhere herein, as
well as from time to time the Company's  other filings with the  Securities  and
Exchange Commission.

Significant Events in 2001

In 2001,  the Company  launched  BrachySeed  I-125  (iodine  version),  a second
generation radioactive implant for treatment of localized prostate cancer, which
was in-licensed by the Company from Draximage Inc. Since the launch, the Company
has increased  its market  penetration  resulting in a positive  sales trend and
consistent  quarter-over-quarter  growth.  The Company  expects to begin selling
BrachySeed  Pd-103  (palladium  version)  in the first half of 2002,  a uniquely
designed  next  generation  radioactive  implant.   BrachySeed  Pd-103  recently
received  marketing  clearance from the U.S. Food and Drug  Administration.  The
Company  expects to utilize  its  existing  oncology  sales  force to market the
BrachySeed  products.  There  can be no  assurance,  however,  as to the  market
acceptance  of these  products  or whether  these  products  will  significantly
increase the revenues of the Company.

Also in 2001, AxCell Biosciences Corporation, a subsidiary of the Company, began
marketing the ProChart database with its marketing partner InforMax. ProChart is
a proprietary  protein  pathway  database which measures  protein  domain-ligand
interactions  in a  high-through  put  manner.  ProChart  is being  marketed  by
InforMax using its  Protein-Protein  Interaction  module,  a new addition to its
GenoMax(TM) enterprise software package. There can be no assurance,  however, as
to  the  market  acceptance  of  this  product  or  whether  this  product  will
significantly increase the revenues for the Company.

In December 2001, Progenics Pharmaceuticals,  our partner in the PSMA LLC, filed
a Biological  Master File with the FDA for  recombinant  subunit  PSMA  vaccine,
which is preparing to enter Phase I clinical  trials in patients with  recurrent
prostate  cancer  in the  first  half of  2002.  The  Company  expects  to incur
significant  costs going  forward to fund its share of  developing  the PSMA LLC
pipeline (see Note 6 to the Consolidated Financial Statements).

                                      -41-
<PAGE>

RESULTS OF OPERATIONS

Years ended December 31, 2001, 2000 and 1999

Revenues
Total  revenues  were  $11.7  million in 2001,  $10.5  million in 2000 and $11.2
million in 1999.  The increase in 2001 from 2000 and 1999 was  primarily  due to
higher product related revenues,  partially offset by lower license and contract
revenues.  Product  related  revenues,   including  product  sales  and  royalty
revenues,  accounted  for 92%,  90% and 72% of revenues in 2001,  2000 and 1999,
respectively.  License and  contract  revenues  accounted  for the  remainder of
revenues.

Product  related  revenues were $10.8 million,  $9.4 million and $8.0 million in
2001, 2000 and 1999,  respectively.  The increase in 2001 from 2000 and 1999 was
due to a price  increase for  ProstaScint  at the  beginning of the year and the
market  introduction  and  commercial  launch of  BrachySeed  I-125 during 2001,
partially  offset by a slight  decrease in sales volume for  ProstaScint.  Sales
from ProstaScint were $7.6 million,  $6.9 million and $6.4 million in 2001, 2000
and  1999,  respectively,  and  accounted  for 70%,  73% and 79% of the  product
related revenues, respectively. Beginning in July 2000, the Company assumed sole
responsibility  for  selling  and  marketing  ProstaScint  from Bard  Urological
Division of C.R. Bard Inc. ("Bard"),  its former  co-marketing  partner.  Future
growth  of  ProstaScint   is  dependent  upon  increased   marketing  and  sales
initiatives by Cytogen's in-house sales force, entry into additional markets and
the implementation of new product applications,  such as using ProstaScint scans
to guide the placement of  brachytherapy  seeds and/or  external beam radiation.
There can be no assurance,  however,  that the Company's internal sales force or
any of its new  marketing  strategy will be able to  significantly  increase the
sale of ProstaScint.  The Company plans to utilize Cytogen's sales and marketing
organization  for the launch of BrachySeed  Pd-103 during the first half of 2002
and later  Combidex,  subject to the  receipt  of final  marketing  approval  of
Combidex by FDA.

Sales from BrachySeed were $773,000 for 2001 and accounted for 7% of the product
related revenues.  Since the market introduction of BrachySeed I-125 in February
2001,  the Company has increased  its market  penetration  of the  brachytherapy
iodine market which has  contributed  to the  quarter-over-quarter  growth.  The
Company plans to begin selling  BrachySeed  Pd-103 during 2002.  There can be no
assurance,  however as to the market  acceptance of the  BrachySeed  products or
whether  these new  products  will  significantly  increase  the revenues of the
Company.

Royalties  from  Quadramet  were $2.1 million,  $2.0 million and $1.1 million in
2001, 2000 and 1999, respectively, and accounted for 19%, 21% and 13% of product
related  revenues.  Quadramet is currently  marketed by the Company's  marketing
partner,  Berlex  Laboratories  Inc. Although Cytogen believes that Berlex is an
advantageous  marketing  partner,  there can be no assurance that Quadramet will
achieve  greater  market  penetration on a timely basis or result in significant
revenues for Cytogen.

Sales from OncoScint  CR/OV were $358,000,  $512,000 and $620,000 in 2001,  2000
and 1999,  respectively.  The market for OncoScint  CR/OV for colorectal  cancer
diagnostic has been negatively affected by positron emission tomography or "PET"
scans  which have shown the same or higher  sensitivity  than  OncoScint  CR/OV.
Consequently,  the Company is  decreasing  its emphasis on OncoScint in order to
focus on its prostate cancer products.

Effective  January 1, 2000,  the Company  adopted U.S.  Securities  and Exchange
Commission Staff Accounting  Bulletin No. 101 "Revenue  Recognition in Financial
Statements" ("SAB 101") which requires up-front,  non-refundable license fees to
be deferred and recognized over the performance period. The cumulative effect of
adopting  SAB 101  resulted in a one-time,  non-cash  charge of $4.3  million or
$0.06 per share in 2000,  which reflects the deferral of an up-front license fee
received from  Berlelx,  net of  associated  costs,  related to the licensing of
Quadramet  recognized in 1998 and a license fee for certain applications of PSMA
to a  joint  venture  formed  by  Cytogen  and  Progenics  recognized  in  1999.
Previously,  the Company had recognized  up-front  license fees when the Company
had no  obligations  to return the fees under any  circumstances.  Under SAB 101
these  payments  are  recorded as  deferred  revenue to be  recognized  over the
remaining  term  of the  related  agreements.  In 2001  and  2000,  the  Company
recognized  $860,000 and  $859,000,  respectively,  of license  revenue that was
included  in the  cumulative  effect  adjustment  as of  January  1,  2000.  The
Company's 1999 results have not been restated to apply SAB 101 retroactively.


                                      -42-
<PAGE>

License  revenues  for 2001,  2000 and 1999  were  $869,000,  $859,000  and $2.0
million,  respectively.  License  revenues  have  fluctuated in the past and may
fluctuate  in the future.  In 1999,  the Company  recorded  $1.8 million for the
licensing of certain  applications  of PSMA to a joint venture formed by Cytogen
and Progenics Pharmaceuticals Inc. Had the Company been subject to SAB 101 prior
to 2000, license revenue would have been $834,000 in 1999.

Revenues  from  contract  manufacturing  and  research  services  were  $43,000,
$165,000 and $1.2 million in 2001,  2000 and 1999,  respectively.  Revenues from
contract  manufacturing  were  $604,000 in 1999.  The Company  discontinued  its
contract  manufacturing services business in 2000 as a result of the sale of its
laboratory and manufacturing facilities.

Operating Expenses
Total operating expenses were $25.7 million,  $35.7 million and $16.9 million in
2001, 2000 and 1999,  respectively.  The current year operating expenses reflect
costs associated with the proteomics research program at AxCell, the development
of  new   manufacturing   and  purification   processes  for  ProstaScint,   the
pre-clinical  development  of the  PSMA  technologies,  and the 2001  launch  of
BrachySeed.  The decrease in 2001 from 2000 was due primarily to charges in 2000
for the acquisition of marketing and technology rights to Combidex and Code 7228
from Advanced  Magnetics,  partially offset by increased  development efforts in
2001 for the  proteomics  programs and the new  manufacturing  and  purification
processes for  ProstaScint  and the 2001 launch of  BrachySeed.  The increase in
2000 from 1999 was due to the  acquisition of Combidex and Code 7228,  increased
development  efforts  for  the  proteomics  programs  and the  expansion  of our
in-house sales force. The 2000 operating  expenditures  included a $13.2 million
charge  related to the  acquisition  of the marketing and  technology  rights to
Combidex  and Code 7228,  of which  $13.1  million  was  non-cash as the Company
issued  its  Common  Stock as  consideration.  The 1999  operating  expenditures
included  a $1.2  million  non-cash  charge  for the  acquisition  of  exclusive
technology rights for immunotherapy to PSMA from Prostagen Inc. ("Prostagen").

Costs of product and contract  manufacturing  revenues were $4.1  million,  $4.4
million and $4.1 million in 2001, 2000 and 1999,  respectively.  The decrease in
2001  from  2000 was due to  lower  manufacturing  costs  resulted  from  better
manufacturing yields for ProstaScint,  partially offset by costs associated with
the purchase of BrachySeeds,  which became  commercially  available in 2001. The
increase in 2000 from 1999 was due to increased product manufacturing costs.

Research and  development  expenses were $10.3 million in 2001,  $7.0 million in
2000 and $3.8  million in 1999.  The increase in 2001 from 2000 and 1999 was due
to increased  funding for the proteomics  programs at AxCell,  costs  associated
with the  development of new  manufacturing  and  purification  processes by DSM
Biologics  Company B.V.  ("DSM") with respect to ProstaScint  (see Note 2 to the
Consolidated  Financial  Statements) and the product development efforts related
to the PSMA  technologies.  In 2001,  2000 and 1999 the  Company  invested  $4.9
million, $3.4 million and $1.1 million, respectively, in the proteomics research
programs and $3.2 million,  $559,000 and $0, respectively,  in the manufacturing
process  development.  The Company  anticipates to incur  comparable  amounts of
expenses for both programs in 2002. During 2001, the Company recognized $332,000
of expenses related to its share of losses for The PSMA Development Company LLC.
The Company expects to incur  significant  costs going forward to fund its share
of  development  costs from this joint  venture (see Note 6 to the  Consolidated
Financial Statements).

Acquisition  of  marketing  and  technology  rights  of  $13.2  million  in 2000
represents a non-cash  charge of $13.1  million  related to the  acquisition  of
certain rights to product candidates Combidex and Code 7228 from AVM (see Note 3
to  the  Consolidated  Financial  Statements).   In  1999,  the  acquisition  of
technology  rights was $1.2 million and represents a non-cash  charge related to
the  acquisition  of  Prostagen  (see  Note  5  to  the  Consolidated  Financial
Statements).

Selling and marketing expenses were $6.3 million,  $6.1 million and $4.2 million
in 2001,  2000 and 1999,  respectively.  The increase in 2001 from 2000 and 1999
was due to the  expansion  of the  Company's  in-house  sales  force  and  costs
associated  with the 2001  launch of  BrachySeed  I-125.  Cytogen  assumed  sole
responsibility  for the selling and marketing of  ProstaScint  in July 2000. The
1999 marketing  expenses reflect efforts to develop and maintain the Partners in
Excellence  ("PIE")  program which  established  a network of qualified  nuclear
medicine  sites and  physicians  which are trained and certified for  acquiring,
processing and interpreting antibody-derived images.

General and  administrative  expenses were $4.9  million,  $4.9 million and $3.5
million in 2001, 2000 and 1999, respectively. The increase in 2000 from 1999 was
due to expenses  related to the termination of the proposed merger with Advanced
Magnetics, stock based compensation for a key employee,  additional staffing and
related costs.

                                      -43-
<PAGE>


Gain on sale of laboratory and manufacturing facilities--
The Company recorded a gain of $3.3 million during 1999 resulting from a sale of
certain of the Company's  laboratory and manufacturing  facilities to Purdue Bio
Pharma for net proceeds of $3.6 million in January 1999.

Insurance Reimbursement--
During  2001,  the  Company  received a one-time  payment  of  $402,000  from an
insurance  claim  filed by the  Company in 2000 to  recover  the loss of product
resulting  from the  rupture  of a tube  during  the  manufacture  of a batch of
ProstaScint.

Interest Income/Expense--
Interest  income was  $635,000,  $774,000 and $441,000 for 2001,  2000 and 1999,
respectively. The decrease in 2001 from 2000 was due to a lower average yield on
investments,  partially  offset by increased income resulting from a higher than
average cash  balance in 2001.  The increase in 2000 from 1999 was due to higher
average cash balances during 2000.

Interest  expense was  $180,000,  $163,000  and $29,000 in 2001,  2000 and 1999,
respectively. The increase in 2001 from 2000 and 1999 was due to finance changes
related to various equipment leases.

Income tax benefit--
During 2001, 2000 and 1999, the Company sold New Jersey State net operating loss
carryforwards  and  research  and  development  credits  which  resulted  in the
recognition of a $1.1 million, $1.6 million and $2.7 million income tax benefit,
respectively.  Under the current legislation,  the Company may be able to sell a
minimum $634,000 of the remaining approved $2.4 million of tax benefits in 2002,
assuming  the  State of New  Jersey  continues  to fund this  program,  which is
uncertain. The actual amount of net operating losses and tax credits the Company
may sell will also depend upon the allocation among  qualifying  companies of an
annual pool established by the State of New Jersey.

Net Income/Loss--
Net loss was $12.1  million in 2001 and $27.3  million in 2000 compared to a net
income of  $729,000  in 1999.  Net loss per share in 2001 and 2000 was $0.16 and
$0.37 based on weighted  average  common shares  outstanding of 77.8 million and
73.3 million, respectively. The 2000 net loss included $4.3 million or $0.06 per
share for the cumulative effect of accounting change as a result of the adoption
of SAB 101.  The basic and diluted net income per common share in 1999 was $0.01
based on weighted  average  common shares  outstanding of 67.2 million for basic
and 68.2 million for diluted.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  cash and cash  equivalents  were $11.3 million as of December 31,
2001,  compared to $12.0  million as of  December  31,  2000.  The cash used for
operating  activities in 2001 was $13.4 million  compared to $9.0 million in the
same period of 2000. The increase in cash used for operating  activities in 2001
was primarily due to increased  development efforts in the proteomics  programs,
expenses  relating  to  the   manufacturing   and  purification   processes  for
ProstaScint and the PSMA technologies,  as well as to marketing costs associated
with the 2001 launch of BrachySeed iodine prostate cancer product.

Historically,  the Company's primary sources of cash have been proceeds from the
issuance and sale of its stock through public offerings and private  placements,
product  related  revenues,  revenues from contract  manufacturing  and research
services,  fees paid under license  agreements  and interest  earned on cash and
short-term  investments.  In October  2000,  the Company  entered into an equity
financing  facility with Acqua Wellington for up to $70 million of Common Stock.
Under the terms of the agreement,  Cytogen could, at its discretion, sell shares
of its Common Stock to Acqua Wellington at a small discount to the market price.
Pursuant to this Equity Financing  Facility,  in February 2001, the Company sold
to Acqua  Wellington  1,276,557 shares of its Common Stock at an aggregate price
of $6.5  million  or  $5.092  per  share.  The  Equity  Financing  Facility  was
terminated in June 2001.

In  June  2001,  the  Company  entered  into a  Share  Purchase  Agreement  (the
"Agreement") with the State of Wisconsin Investment Board ("SWIB"),  pursuant to
which the Company sold  1,820,000  shares of Cytogen common stock to SWIB for an
aggregate purchase price of $8.2 million, before transaction costs, or $4.50 per
share. In connection with the Agreement, the Company was required to discontinue
the  use of the  Equity  Financing  Facility  with  Acqua  Wellington  and  such
agreement was terminated.

                                      -44-
<PAGE>

In October 2001, the Company filed a shelf Registration Statement on Form S-3 to
register 10,000,000 shares of its common stock. Such Registration  Statement was
declared  effective by the Securities and Exchange  Commission in November 2001.
The Company may issue such  registered  shares of common stock from time to time
and may use the proceeds thereof for general corporate purposes,  including, but
not limited to, continued  development and  commercialization  of its proteomics
technologies,  research and development of additional  products and expansion of
its sales and marketing capabilities.

In January 2002,  the Company sold  2,970,665  shares of Cytogen common stock to
SWIB for an aggregate purchase price of $8.0 million or $2.69 per share.

In  connection  with our stock  issuances  to SWIB,  we agreed not to enter into
equity line  arrangements in the future,  issue certain  securities at less than
fair market  value or  undertake  certain  other  securities  issuances  without
requisite stockholder approval.

In January  2002,  the Company  received  cash of $1.1  million  relating to the
December  2001 sale of New Jersey  State net  operating  losses and research and
development credits.  Under the current legislation,  the Company may be able to
sell a minimum  $634,000 of the remaining  approved $2.4 million of tax benefits
in 2002 assuming the State of New Jersey continues to fund for this program. The
actual amount of net operating  losses and tax credits the Company may sell will
also depend upon the  allocation  among  qualifying  companies of an annual pool
established by the State of New Jersey.

The  Company's  capital and operating  requirements  may change  depending  upon
various factors,  including:  (i) whether the Company and its strategic partners
achieve  success  in  manufacturing,  marketing  and  commercialization  of  its
products;  (ii) the amount of  resources  which the Company  devotes to clinical
evaluations and the expansion of marketing and sales capabilities; (iii) results
of clinical trials and research and development activities; and (iv) competitive
and  technological  developments,  in particular,  the Company  expects to incur
significant costs for the development of its proteomics and PSMA technologies.

The  Company's  financial  objectives  are to meet  its  capital  and  operating
requirements through revenues from existing products and licensing arrangements.
To achieve its  strategic  objectives,  the Company may enter into  research and
development partnerships and acquire, in-license and develop other technologies,
products or services.  Certain of these  strategies may require  payments by the
Company  in  either  cash or stock in  addition  to the  costs  associated  with
developing and marketing a product or technology.  However,  Management believes
that, if successful,  such strategies may increase long-term revenues. There can
be no assurance as to the success of such  strategies  or that  resulting  funds
will  be  sufficient  to meet  cash  requirements  until  product  revenues  are
sufficient to cover  operating  expenses,  if ever. To fund these  strategic and
operating  activities,  the Company may sell equity or debt securities as market
conditions permit or enter into credit facilities.

The  Company  has  incurred  negative  cash  flows  from  operations  since  its
inception,  and has  expended,  and expects to continue to expend in the future,
substantial  funds  to  implement  its  planned  product  development   efforts,
including acquisition of products and complementary  technologies,  research and
development,  clinical  studies and  regulatory  activities,  and to further its
marketing  and sales  programs.  The Company  expects that its existing  capital
resources  should  be  adequate  to  fund  the  Company's   operations  for  the
foreseeable  future.  The  Company  cannot  assure  you  that  its  business  or
operations  will not change in a manner that would consume  available  resources
more rapidly than anticipated.  The Company expects that it will have additional
requirements  for debt or equity  capital,  irrespective  of whether and when it
reaches  profitability,  for  further  product  development  costs,  product and
technology acquisition costs, and working capital.

The Company's  future capital  requirements  and the adequacy of available funds
will depend on numerous factors,  including the successful  commercialization of
its  products,  the  costs  associated  with the  acquisition  of  complementary
products and  technologies,  progress in its product  development  efforts,  the
magnitude and scope of such efforts,  progress  with clinical  trials,  progress
with regulatory affairs activities, the cost of filing,  prosecuting,  defending
and enforcing patent claims and other  intellectual  property rights,  competing
technological and market developments,  and the expansion of strategic alliances
for the sales, marketing, manufacturing and distribution of its products. To the
extent that the currently  available funds and revenues are insufficient to meet
current or planned  operating  requirements,  the  Company  will be  required to
obtain  additional funds through equity or debt financing,  strategic  alliances
with corporate  partners and others,  or through other sources.  There can be no
assurance  that the financial  sources  described  above will be available  when
needed or at terms commercially acceptable to the Company. If adequate funds are
not  available,  the Company may be  required  to delay,  further  scale back or
eliminate  certain  aspects of its operations or attempt to obtain funds through
arrangements with collaborative  partners or others that may require the Company

                                      -45-
<PAGE>

to  relinquish  rights  to  certain  of its  technologies,  product  candidates,
products  or  potential  markets.  If  adequate  funds  are not  available,  the
Company's  business,  financial  condition  and  results of  operations  will be
materially and adversely affected.

CRITICAL ACCOUNTING POLICIES

Financial  Reporting  Release  No.  60,  which  was  recently  released  by  the
Securities  and  Exchange  Commission,  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial  statements.  Note  1 of  the  Notes  to  our  Consolidated  Financial
Statements includes a summary of our significant accounting policies and methods
used in the preparation of our Consolidated Financial Statements.  The following
is a brief  discussion of the more significant  accounting  policies and methods
used by us. The preparation of our Consolidated Financial Statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during  the  reporting  period.  Our  actual  results  could  differ  from those
estimates. In addition, Financial Reporting Release No. 61 was recently released
by the Securities and Exchange  Commission to require all companies to include a
discussion  to  address,  among  other  things,  liquidity,   off-balance  sheet
arrangements, contractual obligations and commercial commitments.

Revenue Recognition

We  recognize  revenue from the sale of our products  upon  shipment.  We do not
grant price  protection to customers.  Quadramet  royalties are recognized  when
earned.  The  Securities  and Exchange  Commission  has issued Staff  Accounting
Bulletin (SAB) No. 101,  "Revenue  Recognition",  which provides guidance on the
recognition  of up-front,  non-refundable  license fees.  Accordingly,  we defer
up-front license fees and recognize them over the estimated  performance  period
of the related agreement.  Since the term of the performance  periods is subject
to management's estimates, future revenues to be recognized could be affected by
changes in such estimates.

Accounts Receivable

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

Inventories

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

Carrying Value of Fixed and Intangible Assets

Our fixed assets and certain of our acquired  rights to market our products have
been recorded at cost and are being amortized on a straight-line  basis over the
estimated useful life those assets. In accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," if indicators  of impairment  exist,  we assess the  recoverability  of the
affected  long-lived  assets by  determining  whether the carrying value of such
assets can be recovered  through  undiscounted  future  operating cash flows. If
impairment is indicated,  we measure the amount of such  impairment by comparing
the carrying  value of the assets to the present  value of the  expected  future
cash flows  associated  with the use of the  asset.  Adverse  changes  regarding
future cash flows to be received from  long-lived  assets could indicate that an
impairment exists, and would require the write down of the carrying value of the
impaired asset at that time.


                                      -46-
<PAGE>


COMMITMENTS

As  outlined  in Note 7, 10 and 16 of the  Notes to our  Consolidated  Financial
Statements,  we have entered into various contractual obligations and commercial
commitments.  The following table  summarizes our contractual  obligations as of
December 31, 2001:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                    Less than        1 to 3        4 to 5       After 5
Contractual Obligation               1 year          years         years         years         Total
------------------------------------------------------------------------------------------------------
<S>                               <C>             <C>           <C>           <C>            <C>
Long-term debt                    $  160,000      $2,700,000            -             -      2,860,000
------------------------------------------------------------------------------------------------------
Capital lease obligations             85,000          13,000            -             -         98,000
------------------------------------------------------------------------------------------------------
Facility leases                      624,000         825,000      104,000             -      1,553,000
------------------------------------------------------------------------------------------------------
Other operating leases               124,000          64,000            -             -        188,000
------------------------------------------------------------------------------------------------------
Research and development contracts   559,000         515,000      260,000       515,000      1,849,000
------------------------------------------------------------------------------------------------------
Minimum royalty payments           1,000,000       3,000,000    2,000,000     5,000,000     11,000,000
------------------------------------------------------------------------------------------------------
</TABLE>

In addition to the above,  we are  obligated  to make certain  royalty  payments
based on sales of the related  product.  We also are  obligated  to make certain
milestone payments if our collaborative  partners achieved specific  development
milestones  or  commercial  milestones as outlined in Note 4 of the Notes to our
Consolidated Financial Statements.

In  connection  with the  acquisition  of  Prostagen,  Inc.  (see  Note 5 to the
Consolidated  Financial  Statements),  the Company may issue up to $4.0  million
worth of  Cytogen  Common  Stock  if  certain  milestones  are  achieved  in the
dendritic cell therapy and PSMA development  programs.  The Company is currently
determinining  whether the initial  $2.0 million  milestone  has been met in the
first  quarter of 2002 based on the  progress  of the  dendritic  cell  prostate
cancer clinical trials being conducted by Northwest  Biotherapeutics Inc. (NWBT,
NASDAQ).





                                      -47-
<PAGE>

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The  Company  does not have  operations  subject  to risks of  foreign  currency
fluctuations, nor does it use derivative financial instruments in its operations
or  investment  portfolio.  The Company  does not have  exposure to market risks
associated with changes in interest  rates, as it has no variable  interest rate
debt  outstanding.  The  Company  does not  believe  it has any  other  material
exposure to market risks associated with interest rates.

Item 8.  Financial Statements and Supplementary Data

The response to Item 8 is submitted as a separate section of this Form 10-K.

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

None.





                                      -48-
<PAGE>


                                    PART 111


Item 10.   Directors and Executive Officers of the Company.

The information  relating to the Company's  directors,  nominees for election as
directors and executive  officers  under the headings  "Election of  Directors",
"Executive  Officers" and "Compliance with Section 16(a) of the Exchange Act" in
the  Company's  definitive  proxy  statement  for the  2002  Annual  Meeting  of
Stockholders is incorporated herein by reference to such proxy statement.

Item 11.   Executive Compensation.

The  discussion  under the heading  "Executive  Compensation"  in the  Company's
definitive  proxy  statement  for the 2002  Annual  Meeting of  Stockholders  is
incorporated herein by reference to such proxy statement.

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

The  discussion  under the heading  "Security  Ownership  of Certain  Beneficial
Owners  and  Management  and  Related  Stockholder  Matters"  in  the  Company's
definitive  proxy  statement  for the 2002  Annual  Meeting of  Stockholders  is
incorporated herein by reference to such proxy statement.

Item 13.   Certain Relationships and Related Transactions.

The   discussion   under  the  heading   "Certain   Relationships   and  Related
Transactions"  in the Company's  definitive  proxy statement for the 2002 Annual
Meeting  of  Stockholders  is  incorporated  herein by  reference  to such proxy
statement.






                                      -49-
<PAGE>


                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

           (a)    Documents filed as a part of the Report:

           (1) and (2)

The response to this  portion of Item 14 is  submitted as a separate  section of
this Form 10-K.

           (3)    Exhibits -


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

3.1    -  Certificate of  Incorporation  of Cytogen  Corporation,  as amended.
          Filed as an exhibit  to Form 10-Q  Quarterly  Report  for the  quarter
          ended June 30, 1996, and incorporated herein by reference.

3.2    -  Certificate   of  Amendment  to  the   Restated   Certificate   of
          Incorporation of Cytogen Corporation,  as amended. Filed as an exhibit
          to Form 10-Q Quarterly Report for the quarter ended June 30, 2000, and
          incorporated herein by reference.

3.3    -  By-Laws of Cytogen Corporation,  as amended.  Filed as an exhibit to
          Form 10-Q Quarterly  Report for the quarter ended  September 30, 2001,
          and incorporated herein by reference.

4.1    -  Amended and Restated Rights Agreement,  dated as of October 19, 1998
          between  Cytogen  Corporation and Chase Mellon  Shareholder  Services,
          L.L.C.,  as Rights Agent.  The Amended and Restated  Rights  Agreement
          includes the Form of  Certificate of  Designations  of Series C Junior
          Participating  Preferred  Stock  as  Exhibit  A,  the  form  of  Right
          Certificate as Exhibit B and the Summary of Rights as Exhibit C. Filed
          as an exhibit to Form 10-Q  Quarterly  Report  for the  quarter  ended
          September 30, 1998, and incorporated herein by reference.

 4.2   -  Certificate  of  Designations  of  Series  C  Junior  Participating
          Preferred  Stock of  Cytogen  Corporation.  Filed as an exhibit to the
          Company's  Registration  Statement  on Form S-8 (File No.  333-59718),
          filed with the Commission on April 27, 2001, and  incorporated  herein
          by reference.

10.1   -  Lease  Agreement,  dated  as of  March  16,  1987,  by and  between
          Peregrine  Investment Partners I, as lessor, and Cytogen  Corporation,
          as lessee.  Filed as an exhibit  to Form 10-K  Annual  Report for Year
          Ended January 2, 1988, and incorporated herein by reference.

10.2.  -  Amendment,  dated as of October 16, 1987, to Lease Agreement between
          Peregrine Investment Partners I and Cytogen  Corporation.  Filed as an
          exhibit  to  Form  S-8  Registration  Statement  (No.  33-30595),  and
          incorporated herein by reference.

10.3   -  1989  Employee  Stock Option  Plan.  Filed as an exhibit to Form S-8
          Registration  Statement (No.  33-30595),  and  incorporated  herein by
          reference.  +

10.4.1 -  1988  Stock  Option  Plan for  Non-Employee  Directors.  Filed as an
          exhibit  to  Form  S-8  Registration  Statement  (No.  33-30595),  and
          incorporated herein by reference. +

10.4.2 -  Amendment  to the  Cytogen  Corporation  1988 Stock  Option Plan for
          Non-Employee Directors dated May 22, 1996. Filed as an exhibit to Form
          10-Q  Quarterly  Report  for the  quarter  ended  June 30,  1996,  and
          incorporated herein by reference. +

                                      -50-
<PAGE>
10.5   -  Standard Form of  Indemnification  Agreement entered into between
          Cytogen  Corporation  and its officers,  directors,  and  consultants.
          Filed as an  exhibit  to  Amendment  No.  1 to Form  S-1  Registration
          Statement (No. 33-31280),  and incorporated  herein by reference.  +

10.6   -  1989 Stock Option Policy for Outside Consultants.  Filed as an exhibit
          to Amendment No. 1 to Form S-1 Registration  Statement (No. 33-31280),
          and incorporated herein by reference. +

10.7.1 -  License  Agreement  dated as of March  31,  1993  between  Cytogen
          Corporation and The Dow Chemical Company.  Filed as an exhibit to Form
          10-Q/A-1  Amendment to Quarterly  Report for the quarter ended July 3,
          1993, and incorporated herein by reference.*

10.7.2 -  Amendment of the License Agreement between Cytogen Corporation and
          The Dow Chemical  Company dated September 5, 1995. Filed as an exhibit
          to Form 10-Q  Quarterly  Report for the quarter  ended March 31, 1996,
          and incorporated herein by reference.*

10.7.3 -  Second  Amendment  to  the  License  Agreement  between  Cytogen
          Corporation and The Dow Chemical  Company dated May 20, 1996. Filed as
          an exhibit to Form  10-Q/A-1  Amendment  to  Quarterly  Report for the
          quarter ended June 30, 1996, and incorporated herein by reference.*

10.8   -  1992 Cytogen Corporation  Employee Stock Option Plan II, as amended.
          Filed as an exhibit to Form S-4 Registration Statement (No. 33-88612),
          and  incorporated  herein by  reference.  +

10.9   -  License Agreement, dated March 10, 1993, between Cytogen Corporation
          and The University of North Carolina at Chapel Hill, as amended. Filed
          as an exhibit to Form 10-K Annual  Report for the year ended  December
          31, 1994, and incorporated herein by reference.*

10.10  -  Option and License  Agreement,  dated July 1, 1993,  between Cytogen
          Corporation and Sloan-Kettering  Institute for Cancer Research.  Filed
          as an exhibit to Form 10-K Annual  Report for the year ended  December
          31, 1994, and incorporated herein by reference.*

10.11  -  Cytogen  Corporation  Amended and  Restated  1995 Stock Option Plan.
          Filed as an exhibit  to Form 10-Q  Quarterly  Report  for the  quarter
          ended September 30, 2001, and incorporated herein by reference. +

10.12  -  Horosziewicz  - Cytogen  Agreement,  dated April 20, 1989,  between
          Cytogen  Corporation and Julius S. Horosziewicz,  M.D., DMSe. Filed as
          an exhibit to Form 10-K Annual Report for the year ended  December 31,
          1995, and incorporated herein by reference.*

10.13  -  Marketing and  Co-Promotion  Agreement  between Cytogen  Corporation
          and C.R. Bard, Inc.  effective  August 1, 1996. Filed as an exhibit to
          Form 10-Q Quarterly  Report for the quarter ended  September 30, 1996,
          and incorporated herein by reference.*

10.14  -  Severance  Agreement  effective as of March 26, 1996 between Cytogen
          Corporation  and John D.  Rodwell,  Ph.D.  Filed as an exhibit to Form
          10-K  Annual  Report  for  the  year  ended  December  31,  1996,  and
          incorporated herein by reference. +

10.15  -  Cytogen Corporation Employee Stock Purchase Plan, as amended.  Filed
          as an exhibit to Form 10-Q  Quarterly  Report  for the  quarter  ended
          September 30, 2001, and  incorporated  herein by reference.  +

10.16  -  License Agreement  between Targon  Corporation and Elan Corporation,
          plc dated July 21,  1997.  Filed as an exhibit to Form 10-Q  Quarterly
          Report for the quarter ended June 30, 1997, and incorporated herein by
          reference.*

                                      -51-
<PAGE>

10.17  -  Employment  Agreement  effective  as of December  23, 1996  between
          Cytogen Corporation and Dr. Graham S. May. Filed as an exhibit to Form
          10-K/A-1  Amendment to Annual  Report for the Year Ended  December 31,
          1997, and incorporated herein by reference. +

10.18  -  Convertible  Promissory  Note dated as of August 12,  1998  between
          Cytogen Corporation and Elan International  Services, Ltd. Filed as an
          exhibit to Form 10-Q  Quarterly  Report for the quarter ended June 30,
          1998, and incorporated herein by reference.

10.19  -  Employment  agreement  effective  as of  August  20,  1998  between
          Cytogen Corporation and H. Joseph Reiser.  Filed as an exhibit to Form
          10-Q  Quarterly  Report for the quarter ended  September 30, 1998, and
          incorporated herein by reference. +

10.20  -  License  Agreement  by and between  Berlex  Laboratories,  Inc.  and
          Cytogen  Corporation dated as of October 28, 1998. Filed as an exhibit
          to Form 10-Q/A-1  Amendment to Quarterly  Report for the quarter ended
          September 30, 1998, and incorporated herein by reference.

10.21  -  Manufacturing  Space  Agreement  between  Bard  BioPharma  L.P. and
          Cytogen  Corporation  dated as of January 7, 1999. Filed as an exhibit
          to Form S-1/A-1  Amendment to Registration  Statement,  filed with the
          Commission on January 27, 1999, and incorporated herein by reference.

10.22  -  Employment  Agreement  effective as of June 10, 1997 between Cytogen
          Corporation and Donald F. Crane,  Jr. Filed as an exhibit to Form 10-K
          Annual Report for the year ended December 31, 1999,  and  incorporated
          herein by reference. +

10.23  -  Amended  and  Restated  1999  Stock  Option  Plan for  Non-Employee
          Directors.  Filed as an exhibit to Form 10-Q Quarterly  Report for the
          quarter  ended  September  30,  2001,  and   incorporated   herein  by
          reference. +

10.24  -  Strategic Alliance Agreement between AxCell Biosciences  Corporation
          and InforMax, Inc. dated as of September 15, 1999. Filed as an exhibit
          to Form 10-K Annual Report for the year ended  December 31, 1999,  and
          incorporated herein by reference.*

10.25  -  AxCell Biosciences  Corporation Employee Stock Option Plan. Filed as
          an exhibit to Form 10-K Annual Report for the year ended  December 31,
          1999, and incorporated herein by reference. +

10.26  -  Master  Loan  and  Security   Agreement  No.  S7600  among  Cytogen
          Corporation,   AxCell  Biosciences   Corporation  and  Finova  Capital
          Corporation  dated December 30, 1999. Filed as an exhibit to Form 10-K
          Annual Report for the year ended December 31, 1999,  and  incorporated
          herein by reference.

10.27  -  Amendment No. 1 to Marketing and  Co-Promotion  Agreement  effective
          as of  January 1, 2000 by and  between  Cytogen  Corporation  and C.R.
          Bard,  Inc. Filed as an exhibit to the Company's  Quarterly  Report on
          Form 10-Q for the quarter ended June 30, 2000, and incorporated herein
          by reference.

10.28  -  License and Marketing  Agreement by and between Cytogen  Corporation
          and  Advanced  Magnetics,  Inc.  dated  August 25,  2000.  Filed as an
          exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
          ended September 30, 2000, and incorporated herein by reference.*

10.29  -  Development  and  Manufacturing  Agreement  by and between  Cytogen
          Corporation and DSM Biologics  Company B.V. dated July 12, 2000. Filed
          as an exhibit to the Company's  Quarterly  Report on Form 10-Q for the
          quarter  ended  September  30,  2000,  and   incorporated   herein  by
          reference.*

                                      -52-
<PAGE>

10.30  -  Common Stock Purchase  Agreement,  dated  September 29, 2000, by and
          between  Cytogen  Corporation  and  Acqua  Wellington  North  American
          Equities  Fund,  Ltd.  Filed as an  exhibit to the  Company's  Current
          Report on Form 8-K,  filed with the Commission on October 5, 2000, and
          incorporated herein by reference.

10.31  -  Common  Stock  Purchase  Agreement,  dated  October 4, 2000,  by and
          between  Cytogen  Corporation  and  Acqua  Wellington  North  American
          Equities  Fund,  Ltd.  Filed as an  exhibit to the  Company's  Current
          Report on Form 8-K, filed with the Commission on October 12, 2000, and
          incorporated herein by reference.

10.32  -  Written  Compensatory  Agreement by and between Cytogen  Corporation
          and H. Joseph  Reiser dated  August 24,  1998,  as revised on July 11,
          2000. Filed as an exhibit to the Company's  Registration  Statement on
          Form S-8 (File No.  333-48454),  filed with the  Commission on October
          23, 2000, and incorporated herein by reference. +

10.33  -  Written  Compensatory  Agreement by and between Cytogen  Corporation
          and Lawrence  Hoffman dated July 10, 2000.  Filed as an exhibit to the
          Company's  Registration  Statement  on Form S-8 (File No.  333-48454),
          filed with the Commission on October 23, 2000, and incorporated herein
          by reference. +

10.34  -  Product  Manufacturing  and Supply  Agreement by and between Cytogen
          Corporation  and Draximage Inc.  dated  December 5, 2000.  Filed as an
          exhibit to the Company's Annual Report on Form 10-K for the year ended
          December 31, 2000. *

10.35  -  License  and   Distribution   Agreement  by  and  between   Cytogen
          Corporation  and Draximage Inc.  dated  December 5, 2000.  Filed as an
          exhibit to the Company's Annual Report on Form 10-K for the year ended
          December 31, 2000. *

10.36  -  Form of  Executive  Change of  Control  Severance  Agreement  by and
          between the Company and each of its  Executive  Officers.  Filed as an
          exhibit to the Company's Annual Report on Form 10-K for the year ended
          December 31, 2001. Filed herewith. +

10.37.1-  Lease  Agreement  by and between  Newtown  Associates,  L.P.  and
          AxCell Biosciences  Corporation dated as of July 23, 1999. Filed as an
          exhibit to the Company's Annual Report on Form 10-K for the year ended
          December 31, 2001. Filed herewith.

10.37.2-  First Amendment to the Lease Agreement by and between 826 Newtown
          Associates,  L.P. and AxCell Biosciences Corporation dated as of March
          16, 2001.  Filed as an exhibit to the  Company's  Quarterly  Report on
          Form 10-Q for the  quarter  ended  March 31,  2001,  and  incorporated
          herein by reference.

10.38  -  Cytogen  Corporation  Stock Payment Bonus Plan Program.  Filed as an
          exhibit to the Company's  Registration Statement on Form S-8 (File No.
          333-58384),   filed  with  the   Commission  on  April  6,  2001,  and
          incorporated herein by reference. +

10.39  -  MFS Fund  Distributors,  Inc.  401(K) Profit Sharing Plan and Trust.
          Filed as an exhibit to the  Company's  Registration  Statement on Form
          S-8 (File No. 333-59718), filed with the Commission on April 27, 2001,
          and incorporated herein by reference. +

10.40  -  Adoption Agreement for MFS Fund Distributors,  Inc. Non-Standardized
          401(K) Profit  Sharing Plan and Trust,  with  amendments.  Filed as an
          exhibit to the Company's  Registration Statement on Form S-8 (File No.
          333-59718),   filed  with  the  Commission  on  April  27,  2001,  and
          incorporated herein by reference.

10.41  -  Cytogen  Corporation  Performance  Bonus  Plan with  Stock  Payment
          Program.  Filed as an exhibit to Company's  Registration  Statement on
          Form S-8 (File No.  333-75304),  filed with the Commission on December
          17, 2001, and incorporated herein by reference. +

                                      -53-
<PAGE>

10.42  -  Share Purchase Agreement by and between Cytogen  Corporation and the
          State of Wisconsin  Investment  Board dated as of June 18, 2001. Filed
          as an exhibit to the Company's  Current Report on Form 8-K, filed with
          the Commission on June 19, 2001, and incorporated herein by reference.

10.43  -  Share Purchase Agreement by and between Cytogen  Corporation and the
          State of  Wisconsin  Investment  Board dated as of January  18,  2002.
          Filed as an exhibit to the Company's Current Report on Form 8-K, filed
          with the  Commission on January 24, 2002, and  incorporated  herein by
          reference.

21     -  Subsidiaries of Cytogen Corporation. Filed herewith.

23     -  Consent of Arthur Andersen LLP. Filed herewith.

99.1   -  Letter  regarding  certain  representation  of Arthur  Andersen LLP,
          dated as of March  28,  2002.  Filed as an  exhibit  to the  Company's
          Annual Report on Form 10-K for the year ended December 31, 2001. Filed
          herewith.

+ Management contract or compensatory plan or arrangement.

* We have received  confidential  treatment of certain  provisions  contained in
this  exhibit  pursuant  to an  order  issued  by the  Securities  and  Exchange
Commission.  The copy filed as an exhibit omits the  information  subject to the
confidentiality grant.

         (b) Reports on Form 8-K:

         We did not file any  Current  Reports on Form 8-K  during  the  quarter
ended December 31, 2001.

         On January 24, 2002, we filed a Current  Report on Form 8-K relating to
the issuance  and sale of  2,970,665  shares of our Common Stock to the State of
Wisconsin Investment Board for an aggregate purchase price of approximately $8.0
million pursuant to a share purchase agreement dated January 18, 2002.

         (c) Exhibits:

         The Exhibits  filed with this Form 10-K are listed above in response to
Item 14(a)(3).

         (d) Financial Statement Schedules:

         None.




                                      -54-
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized on the 28th day of March
2002.

                      Cytogen Corporation

                      By:  /s/ H. Joseph Reiser
                         ------------------------------------------------------
                         H. Joseph Reiser, President and Chief Executive Officer








                                     -55-
<PAGE>


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

<TABLE>
<CAPTION>

         Signature                                 Title                              Date
------------------------------   --------------------------------------------    --------------

<S>                              <C>                                             <C>
/s/ H. Joseph Reiser             Chief Executive Officer and President           March 28, 2002
------------------------------   (Principal Executive Officer), and Director
H. Joseph Reiser

/s/ Lawrence R. Hoffman          Vice President & Chief Financial Officer        March 28, 2002
------------------------------   Treasurer and Secretary
Lawrence R. Hoffman              (Principal Financial and Accounting Officer)

/s/ John E. Bagalay, Jr.         Director                                        March 28, 2002
------------------------------
John E. Bagalay, Jr.

/s/ Stephen K. Carter            Director                                        March 28, 2002
------------------------------
Stephen K. Carter

/s/ James A. Grigsby             Director and Chairman of the Board              March 28, 2002
------------------------------
James A. Grigsby

/s/ Robert F. Hendrickson        Director                                        March 28, 2002
------------------------------
Robert F. Hendrickson

/s/ Kevin G. Lokay               Director                                        March 28, 2002
------------------------------
Kevin G. Lokay
</TABLE>




                                      -56-
<PAGE>

                         Form 10-K Item 14(a)(1) and (2)

                      CYTOGEN CORPORATION AND SUBSIDIARIES


(1)  Index to Consolidated Financial Statements
     -------------------------------------------

The  following  consolidated  financial  statements of Cytogen  Corporation  and
Subsidiaries  together with the related notes and report of Arthur Andersen LLP,
independent public accountants.

<TABLE>
<CAPTION>

                                                                                                    Page in
                                                                                                   Form 10-K
<S>                                                                                                    <C>
Report of Independent Public Accountants.........................................................      58

Consolidated Balance Sheets as of December 31, 2001 and 2000.....................................      59

Consolidated Statements of Operations--Years Ended December 31, 2001, 2000 and 1999 .............      60

Consolidated Statements of Stockholders' Equity--Years Ended December 31, 2001, 2000 and 1999....      61

Consolidated Statements of Cash Flows--Years Ended December 31, 2001, 2000 and 1999..............      62

Notes to Consolidated Financial Statements.......................................................      63

</TABLE>

                                      -57-
<PAGE>




                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Cytogen Corporation:

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Cytogen
Corporation (a Delaware  Corporation)  and  Subsidiaries as of December 31, 2001
and 2000, and the related consolidated  statements of operations,  stockholders'
equity and cash flows for each of the three years in the period  ended  December
31, 2001.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the  consolidated   financial  position  of  Cytogen
Corporation and Subsidiaries as of December 31, 2001 and 2000 and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2001, in conformity  with  accounting  principles  generally
accepted in the United States.

As  explained  in Note 1 to the  consolidated  financial  statements,  effective
January 1, 2000,  the  Company  changed  its method of  accounting  for  revenue
recognition.


                                                        ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
February 5, 2002


                                      -58-
<PAGE>
                               CYTOGEN CORPORATION AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                           (All amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                             -----------------------
                                                                                2001          2000
                                                                             ---------     ---------
<S>                                                                          <C>           <C>
ASSETS:
Current Assets:
     Cash and cash equivalents ...........................................   $  11,309     $  11,993
     Marketable securities ...............................................       1,376             -
     Receivable on income tax benefit sold ...............................       1,103         1,625
     Accounts receivable, net ............................................       1,621         1,841
     Inventories .........................................................       1,889           883
     Other current assets ................................................         508           377
                                                                             ---------     ---------

         Total current assets ............................................      17,806        16,719

Property and Equipment, net ..............................................       1,831         2,193

Other Assets .............................................................       1,855         1,504
                                                                             ---------     ---------

                                                                             $  21,492        20,416
                                                                             =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
    Current portion of long-term debt ...................................    $      77     $     151
    Accounts payable and accrued liabilities ............................        5,315         7,218
    Deferred revenue ....................................................          534           859
                                                                             ---------     ---------

         Total current liabilities .......................................       5,926         8,228
                                                                             ---------     ---------

Long-Term Debt ...........................................................       2,291         2,374
                                                                             ---------     ---------

Deferred Revenue .........................................................       2,061         2,596
                                                                             ---------     ---------

Commitments and Contingencies (Note 16)

Stockholders' Equity:
     Preferred stock, $.01 par value, 5,400,000 shares authorized -
         Series C Junior Participating Preferred Stock, $.01 par value,
         200,000 shares authorized, none issued and outstanding ..........          -              -

     Common stock, $.01 par value, 250,000,000 shares authorized,
         78,937,000 and 75,594,000 shares issued and outstanding
         at December 31, 2001 and 2000, respectively .....................         789           756
     Additional paid-in capital ..........................................     350,867       335,938
     Deferred compensation ...............................................        (621)         (895)
     Accumulated other comprehensive income ..............................         860             -
     Accumulated deficit .................................................    (340,681)     (328,581)
                                                                             ---------     ---------

         Total stockholders' equity ......................................      11,214         7,218
                                                                             ---------     ---------


                                                                             $  21,492     $  20,416
                                                                             =========     =========
</TABLE>
                The accompanying notes are an integral part of these statements.

                                                 -59-
<PAGE>
                                  CYTOGEN CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                            (All amounts in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                                                   -------------------------------------
                                                                      2001          2000          1999
                                                                   ---------     ---------     ---------
<S>                                                                <C>           <C>           <C>
Revenues:
  Product related:
      ProstaScint ............................................     $  7,561      $  6,912      $  6,351
      BrachySeed .............................................          773             -             -
      OncoScint ..............................................          358           512           620
                                                                   --------      --------      --------
         Total product sales .................................        8,692         7,424         6,971

      Quadramet royalties ....................................        2,063         2,004         1,060
                                                                   --------      --------      --------
         Total product related ...............................       10,755         9,428         8,031

  License and contract .......................................          912         1,024         3,171
                                                                   --------      --------      --------

         Total revenues ......................................       11,667        10,452        11,202
                                                                   --------      --------      --------

Operating Expenses:
  Cost of product and contract manufacturing revenues ........        4,126         4,414         4,111
  Research and development ...................................       10,340         6,957         3,849
  Acquisition of marketing and technology rights .............            -        13,241         1,214
  Selling and marketing ......................................        6,314         6,126         4,210
  General and administrative .................................        4,947         4,934         3,501
                                                                   --------      --------      --------

         Total operating expenses ............................       25,727        35,672        16,885
                                                                   --------      --------      --------

         Operating loss ......................................      (14,060)      (25,220)       (5,683)

Insurance reimbursement ......................................          402             -             -
Gain on sale of laboratory and manufacturing facilities ......            -             -         3,298
Interest income ..............................................          635           774           441
Interest expense .............................................         (180)         (163)          (29)
                                                                   --------      --------      --------

         Loss before income taxes and cumulative effect
          of accounting change ...............................      (13,203)      (24,609)       (1,973)
Income tax benefit ...........................................       (1,103)       (1,625)       (2,702)
                                                                   --------      --------      --------

         Income (loss) before cumulative effect of
          accounting change ..................................      (12,100)      (22,984)          729
Cumulative effect of accounting change (Note 1) ..............            -        (4,314)            -
                                                                   --------      --------      --------

Net income (loss) ............................................     $(12,100)     $(27,298)     $    729
                                                                   ========      ========      ========

Net income (loss) per share:
         Basic and diluted net income (loss) before cumulative
          effect of accounting change ........................     $  (0.16)     $  (0.31)     $   0.01
         Cumulative effect of accounting change ..............           -          (0.06)            -
                                                                   --------      --------      --------
         Basic and diluted net income (loss) .................     $  (0.16)     $  (0.37)     $   0.01
                                                                   ========      ========      ========
Weighted average common shares outstanding:
         Basic ...............................................       77,783        73,337        67,179
                                                                   ========      ========      ========
         Diluted .............................................       77,783        73,337        68,187
                                                                   ========      ========      ========
</TABLE>
                The accompanying notes are an integral part of these statements.

                                                -60-
<PAGE>
                                      CYTOGEN CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                  (All amounts in thousands, except share data)
<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                                               Other
                                                                     Additional  Deferred     Compre-      Accu-         Total
                                                         Common        Paid-in    Compen-     hensive     mulated    Stockholders'
                                                          Stock        Capital    sation      Income      Deficit        Equity
                                                        ---------   ------------ ---------  -----------  ----------  -------------

<S>                                                     <C>         <C>           <C>          <C>       <C>           <C>
Balance, December 31, 1998                              $   619     $  301,836    $   -        $   -     $(302,012)    $     443

Issuance of  2,050,000 shares of common stock
   in connection with the acquisition of
   Prostagen Inc. ...................................       21           1,824        -            -             -         1,845
Sale of 6,527,002 shares of common stock ............       65           7,244        -            -             -         7,309
Issuance of options and warrants to purchase
   shares of common stock ...........................        -             221        -            -             -           221
Deferred compensation related to
   stock options ....................................        -              84      (84)           -             -             -
Amortization of deferred compensation ...............        -               -        2            -             -             2
Net income ..........................................        -               -        -            -           729           729
                                                      ---------      ---------    -----        -----     ---------     ---------

Balance, December 31, 1999 ..........................      705         311,209      (82)           -      (301,283)       10,549

Sale of 3,567,771 shares of
   common stock .....................................       36          10,342        -            -             -        10,378
Issuance of 1,500,000 shares of common stock
   in connection with the acquisition of
   product candidates marketing rights ..............       15          13,064        -            -             -        13,079
Issuance of options to purchase
   shares of common stock ...........................        -             261        -            -             -           261
Deferred compensation related to
   stock options ....................................        -           1,062   (1,062)           -             -             -
Amortization of deferred compensation ...............        -               -      249            -             -           249
Net loss ............................................        -               -        -            -       (27,298)      (27,298)
                                                      --------       ---------   ------        -----     ---------     ---------

Balance, December 31, 2000 ..........................      756         335,938     (895)           -      (328,581)        7,218

Sale of 3,241,485 shares of
   common stock .....................................       32          14,206        -            -             -        14,238
Issuance of stock and stock options related
   to compensation ..................................        1             281        -            -             -           282
Issuance of options and warrants to purchase
   shares of common stock ...........................        -             201        -            -             -           201
Deferred compensation related to
   stock options ....................................        -             241     (241)           -             -             -
Amortization of deferred compensation ...............        -               -      515            -             -           515
                                                                                                                       ---------
Comprehensive loss:
   Net loss .........................................        -               -        -            -       (12,100)      (12,100)
   Unrealized gain on marketable securities .........        -               -        -          860             -           860
                                                                                                                       ---------
        Total comprehensive loss ....................                                                                    (11,240)
                                                      --------       ---------   ------        -----     ---------     ---------

Balance, December 31, 2001 .......................... $    789       $ 350,867   $ (621)       $ 860     $(340,681)    $  11,214
                                                      ========       =========   ======        =====     =========     =========
</TABLE>
                The accompanying notes are an integral part of these statements.

                                                  -61-
<PAGE>
                                    CYTOGEN CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (All amounts in thousands)


<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                      ---------------------------------------
                                                                         2001           2000           1999
                                                                      ----------     ----------     ---------
<S>                                                                   <C>            <C>            <C>
Cash Flows From Operating Activities:
Net income (loss)...................................................  $ (12,100)     $ (27,298)     $     729
                                                                      ---------      ---------      ---------
Adjustments to reconcile net income (loss) to net cash used in
   operating activities:
     Depreciation and amortization .................................      1,186         1,027          1,051
     Imputed interest (income) expense .............................        (43)           29             87
     Warrant, stock and stock option grants ........................        201           261            221
     Stock based compensation expenses .............................        608           249              2
     Amortization of deferred revenue ..............................       (860)         (859)             -
     Acquisition of marketing and technology rights ................          -        13,079          1,214
     Cumulative effect of accounting change ........................          -         4,314              -
     Write down of property and equipment ..........................          -             -             79
     Gain on sale of laboratory and manufacturing facilities .......          -             -         (3,298)
     Gain on sale of other property and equipment ..................          -          (148)           (54)
     Changes in assets and liabilities:
         Accounts receivable, net ..................................        263           397           (715)
         Inventories ...............................................     (1,006)         (198)          (435)
         Other assets ..............................................         24        (1,631)           (97)
         Accounts payable and accrued liabilities ..................     (1,714)        1,740         (2,661)
                                                                      ---------     ---------      ---------

                   Total adjustments ...............................     (1,341)       18,260         (4,606)
                                                                      ---------     ---------      ---------

         Net cash used in operating activities .....................    (13,441)       (9,038)        (3,877)
                                                                      ---------     ---------      ---------

Cash Flows From Investing Activities:
Purchases of property and equipment ................................       (813)       (1,209)          (523)
Purchase of product rights .........................................       (500)         (500)             -
Net cash acquired from Prostagen, Inc. .............................          -             -            550
Net proceeds from sale of laboratory and manufacturing facilities...          -             -          3,584
Net proceeds from sale of other property and equipment .............          -           148            714
(Increase) decrease in short-term investments ......................          -         1,593         (1,593)
                                                                      ---------     ---------      ---------
         Net cash provided by (used in) investing activities .......     (1,313)           32          2,732
                                                                      ---------     ---------      ---------

Cash Flows From Financing Activities:
Proceeds from sale of common stock .................................     14,238        10,378          9,809
Payments of long-term liabilities ..................................       (168)         (180)          (878)
                                                                      ---------     ---------      ---------
         Net cash provided by financing activities .................     14,070        10,198          8,931
                                                                      ---------     ---------      ---------

Net increase (decrease) in cash and cash equivalents ...............       (684)        1,192          7,786
Cash and cash equivalents, beginning of year .......................     11,993        10,801          3,015
                                                                      ---------     ---------      ---------
Cash and cash equivalents, end of year .............................  $  11,309     $  11,993      $  10,801
                                                                      =========     =========      =========
</TABLE>
                The accompanying notes are an integral part of these statements.

                                                  -62-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Cytogen Corporation ("Cytogen" or the "Company") is a biopharmaceutical  company
with an established  and growing product line in prostate cancer and other areas
of  oncology.   FDA-approved  products  include   ProstaScint(R)  (a  monoclonal
antibody-based  imaging  agent used to image the  extent and spread of  prostate
cancer);  BrachySeed(TM) I-125 and Pd-103,  (uniquely designed,  next-generation
radioactive seed implants for the treatment of localized  prostate cancer);  and
Quadramet(R)  (a  therapeutic  agent  marketed  for the  relief  of bone pain in
prostate and other types of cancer).  Cytogen is evolving a pipeline of oncology
product candidates by developing its prostate specific membrane antigen, or PSMA
technologies,  which are  exclusively  licensed  from  Memorial  Sloan-Kettering
Cancer  Center.

AxCell,  a subsidiary  of Cytogen  Corporation,  is engaged in the research and
development of novel  biopharmaceutical  products using its growing portfolio of
functional   proteomics   solutions  and   collection  of   proprietary   signal
transduction  pathway  information.  Through the systematic  and  industrialized
measurement   of   protein-to-protein   interactions,   AxCell   is   assembling
ProChart(TM),  a proprietary database of signal transduction pathway information
that is relevant in a number of  therapeutically  important classes of molecules
including growth factors,  receptors and other potential protein therapeutics or
drug targets.  AxCell's  database  content and functional  proteomics  tools are
available on a non-exclusive basis to biotechnology, pharmaceutical and academic
researchers.  AxCell is expanding and  accelerating  its research  activities to
further  elucidate  the role of novel  proteins  and  pathways in  ProChart(TM),
through both external collaborations and internal data mining.

Basis of Consolidation

The consolidated  financial  statements  include the accounts of Cytogen and its
wholly-owned  subsidiaries.  Intercompany  balances and  transactions  have been
eliminated in consolidation.

Use of Estimates

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

Statements of Cash Flows

Cash and cash  equivalents  include  cash on hand,  cash in banks and all highly
liquid  investments  with  maturity  of  three  months  or less  at the  time of
purchase.  Cash paid for interest  expense was $180,000,  $99,000 and $44,000 in
2001,  2000 and 1999,  respectively.  During  2001,  2000 and 1999,  the Company
purchased  $11,000,  $49,000 and  $223,000,  respectively,  of  equipment  under
various capital leases.

Marketable Securities

In connection  with the acquisition of Prostagen Inc. in June 1999 (see Note 5),
the Company  received 275,350 shares of Northwest  Biotherapeutics,  Inc. common
stock.  The  Company  has  classified  this  investment  as   available-for-sale
securities  in  accordance  with  Statement  of Financial  Accounting  Standards
("SFAS")  No.  115,  "Accounting  for  Certain  Investments  in Debt and  Equity
Securities."  Available-for-sale  securities are carried at fair value, based on
quoted market prices,  with  unrealized  gains or losses  reported as a separate
component of stockholders'  equity.  As of December 31, 2001, the Company had an
unrealized gain of $860,000 related to this  investment.  There is no assurance,
however that the Company can sell these securities within a reasonable amount of
time without negatively effecting the price of the stock since the daily trading
volume has been low.


                                      -63-
<PAGE>

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


Receivables

At December 31, 2001 and 2000,  accounts receivable were net of an allowance for
doubtful accounts of $30,000 and $35,000,  respectively.  The Company charged to
expense $0, $0 and $10,000 as a provision  for  doubtful  accounts and wrote off
$5,000,  $47,000  and $0 of  uncollectible  accounts  in 2001,  2000  and  1999,
respectively.  At December 31, 2001 and 2000, the Company had a $1.1 million and
$1.6 million receivable,  respectively, due from Public Service Electric and Gas
Company  relating to the sales of New Jersey state operating loss  carryforwards
and research and  development  credits.  The Company  received the proceeds from
these receivables in January 2002 and 2001, respectively.

Inventories

The Company's  inventories  are primarily  related to ProstaScint  and OncoScint
CR/OV. Inventories are stated at the lower of cost or market using the first-in,
first-out method and consisted of the following:

                                                               December 31,
                                                               ------------
                                                            2001         2000
                                                            ----         ----

     Raw materials...................................   $  506,000     $718,000
     Work-in process.................................    1,371,000       59,000
     Finished goods..................................       12,000      106,000
                                                        ----------     --------
                                                        $1,889,000     $883,000
                                                        ==========     ========

Property and Equipment

Property  and  equipment  are  stated at cost,  net of  depreciation.  Leasehold
improvements are amortized on a straight-line basis over the lease period or the
estimated  useful  life,  whichever  is shorter.  Equipment  and  furniture  are
depreciated on a straight-line basis over three to five years.  Expenditures for
repairs  and  maintenance  are  charged  to expense as  incurred.  Property  and
equipment consisted of the following:

                                                               December 31,
                                                               ------------
                                                            2001        2000
                                                            ----        ----

     Leasehold improvements...........................  $3,425,000  $ 3,211,000
     Equipment and furniture..........................   6,224,000    5,668,000
                                                        ----------  -----------

                                                         9,649,000    8,879,000
     Less - accumulated depreciation and amortization   (7,818,000)  (6,686,000)
                                                        ----------  -----------
                                                        $1,831,000  $ 2,193,000
                                                        ==========  ===========

In 1999, the Company sold certain of its laboratory and manufacturing facilities
to Bard BioPharma L.P., a subsidiary of Purdue Pharma L.P. ("Purdue"),  for $3.6
million, net of approximately  $300,000 of transaction costs. As a result of the
sale, the Company recognized a gain of approximately $3.3 million during 1999.

Fair Value of Financial Instruments

The  Company's  financial   instruments  consist  primarily  of  cash  and  cash
equivalents,  marketable  securities,  accounts  receivable,  accounts  payable,
accrued  expenses and long-term debt. The Company believes the carrying value of
these assets and liabilities are considered to be  representative  of their fair
market value.

Impairment of Long-Lived Assets

In accordance  with SFAS No. 121,  "Accounting  for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," if indicators of impairment
exist,  Management assesses the recoverability of the affected long-lived assets
by  determining  whether  the  carrying  value of such  assets can be  recovered
through undiscounted future operating cash flows. If impairment is indicated


                                      -64-
<PAGE>

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


Management  measures the amount of such  impairment  by  comparing  the carrying
value of the  assets to the  present  value of the  expected  future  cash flows
associated with the use of the asset.  Management believes the future cash flows
to be received  from the  long-lived  assets  will  exceed the assets'  carrying
value,  and,  accordingly,  the Company has not recognized any impairment losses
through December 31, 2001.

Other Assets

Other assets consists of the following:

                                                                December 31,
                                                                ------------
                                                             2001         2000
                                                             ----         ----

  Investment in Northwest Biotherapeutics, Inc.........  $      -     $  516,000
  BrachySeed Marketing Rights (Note 4).................     903,000      496,000
  Investment in PSMA Development Co. LLC (Note 6)......     588,000       20,000
  Other ...............................................     364,000      472,000
                                                         ----------   ----------
                                                         $1,855,000   $1,504,000
                                                         ==========   ==========

Revenue Recognition

Product related  revenues  include product sales by Cytogen to its customers and
Quadramet royalties.  Product sales are recognized upon shipment of the finished
goods. The Company does not grant price  protection to its customers.  Royalties
are recognized as revenue when earned.

License  and  contract  revenues  include  milestone  payments  and  fees  under
collaborative   agreements   with  third   parties,   revenues   from   contract
manufacturing  and  research  services,  and revenues  from other  miscellaneous
sources.  In 2000, the Company  discontinued  contract  manufacturing  services,
concurrent  with the sale of the  manufacturing  and laboratory  facilities (see
Property and Equipment above) and therefore received no revenue from this source
since 2000.

Effective  January 1, 2000,  the Company  adopted U.S.  Securities  and Exchange
Commission Staff Accounting Bulletin No. 101, "Revenue  Recognition in Financial
Statements" ("SAB 101"),  which, as applied to the Company,  requires  up-front,
non-refundable  license fees to be deferred and recognized  over the performance
period.  The  cumulative  effect of  adopting  SAB 101  resulted  in a one-time,
non-cash charge of $4.3 million or $0.06 per share,  which reflects the deferral
of an up-front license fee received from Berlex  Laboratories,  Inc. ("Berlex"),
net of associated  costs,  related to the  licensing of Quadramet  recognized in
October  1998 and a  license  fee for  certain  applications  of PSMA to a joint
venture  formed by Cytogen  and  Progenics  Pharmaceuticals  Inc.  ("Progenics")
recognized  in June 1999 (see Note 6).  Previously,  the Company had  recognized
up-front  license  fees when the Company had no  obligations  to return the fees
under any circumstances.  Under SAB 101, these payments are recorded as deferred
revenue to be recognized over the remaining term of the related agreements.  For
the years ended December 31, 2001 and 2000, the Company recognized  $860,000 and
$859,000 in revenues,  respectively, that were included in the cumulative effect
adjustment as of January 1, 2000.

Prior  year  financial  statements  have not  been  restated  to  apply  SAB 101
retroactively;  however, the following pro forma amounts present the net loss to
common   stockholders   and  net  loss  per  share   assuming  the  Company  had
retroactively applied SAB 101.


                                                     Year Ended December 31,
                                                --------------------------------
                                                     2000               1999
                                                -------------     --------------

  Net income (loss), as reported..............  $(27,298,000)     $     729,000
                                                =============     ==============

  Net income (loss) per share, as reported....  $      (0.37)     $        0.01
                                                =============     ==============

  Pro forma net loss .........................  $(22,984,000)     $    (484,000)
                                                =============     ==============

  Pro forma net loss per share................  $      (0.31)     $       (0.01)
                                                =============     ==============


                                      -65-
<PAGE>


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


Research and Development

Research  and  development  expenditures  consist of projects  conducted  by the
Company and payments made to sponsored  research  programs and consultants.  All
research and development costs are charged to expense as incurred.  Research and
development  expenditures for customer sponsored programs were $17,000,  $45,000
and $194,000 in 2001, 2000 and 1999, respectively.

Patent Costs

Patent costs are charged to expense as incurred.

Net Income (Loss) Per Share

Basic net  income  (loss) per common  share is based upon the  weighted  average
common  shares  outstanding  during each  period.  Diluted net income per common
share in 1999 is based upon the weighted  average common shares  outstanding and
common stock  equivalents,  which represent the  incremental  common shares that
would have been  outstanding  under certain employee stock options and warrants,
upon assumed  exercise of dilutive stock options and warrants.  Diluted net loss
per  share  for 2001 and 2000 is the same as basic  net loss per  share,  as the
inclusion of common stock equivalents would be antidilutive (see Note 12).

Other Comprehensive Income

The  Company  follows  SFAS No.  130,  "Reporting  Comprehensive  Income."  This
statement requires the classification of items of other comprehensive  income by
their  nature and  disclose of the  accumulated  balance of other  comprehensive
income separately from retained  earnings and additional  paid-in capital in the
equity section of the balance sheet.

2.  DSM  BIOLOGICS COMPANY B.V.

In July 2000, the Company entered into a Development and Manufacturing Agreement
with DSM  Biologics  Company  B.V.  ("DSM"),  pursuant to which DSM will conduct
certain  development  activities  with  respect to  ProstaScint,  including  the
delivery  of a  limited  number  of  batches  of  ProstaScint  for  testing  and
evaluation  purposes.  Under the terms of such  agreement,  and  subject  to the
satisfactory   performance  thereof  by  DSM  and  the  achievement  of  certain
regulatory  approvals  for the  manufacturing  of  ProstaScint,  the parties are
obligated   to   negotiate   in  good  faith  a  long  term  supply   agreement.
Notwithstanding  the parties'  obligations  to perform under the agreement or to
negotiate a supply  agreement in good faith,  the Company cannot be certain that
DSM will satisfactorily  perform its obligations  thereunder or that the parties
will be able to negotiate a supply agreement on commercially satisfactory terms,
if at all. Alternatively, the Company has the option, but not the obligation, to
enter into certain licensing  arrangements with DSM for the technology developed
on terms and conditions to be agreed upon by the parties.  In 2001 and 2000, the
Company  recorded  $3.2  million  and  $559,000,  respectively,  of  development
expenses related to this agreement.

3.  ADVANCED MAGNETICS, INC.

In August 2000, the Company and Advanced Magnetics, Inc. ("Advanced Magnetics"),
a developer of novel diagnostic  pharmaceuticals  for use in magnetic  resonance
imaging  (MRI),  entered into  marketing,  license and supply  agreements  ("AVM
Agreements").  Under the AVM  Agreements,  Cytogen  acquired  certain  rights to
Advanced Magnetics' product candidates:  Combidex(R), MRI contrast agent for the
detection  of lymph node  metastases  and imaging  agent Code 7228 for  oncology
applications.  Advanced  Magnetics will be responsible for all costs  associated
with the clinical development,  supply and manufacture of Combidex and Code 7228
and will receive royalties based upon product sales.

In exchange for the future marketing  rights to Combidex and Code 7228,  Cytogen
issued 1.5 million  shares of its Common Stock to Advanced  Magnetics at closing
and may issue an  additional  500,000  shares,  which are  currently  in escrow,
subject to the achievement of certain milestones.  Since the Advanced Magnetics'
product  candidates have not yet received FDA approval,  the Company  recorded a
$13.2  million  charge  in the  December  31,  2000  consolidated  statement  of
operations  for the  acquisition of marketing and  technology  rights,  of which
$13.1  million was  non-cash and  represented  the fair value of the 1.5 million
shares of Common Stock issued. There can be no assurance that Advanced Magnetics
will receive FDA approval to market Combidex or Code 7228 in the United States.

4.  DRAXIMAGE INC.

In December 2000, the Company  entered into a Product  Manufacturing  and Supply
Agreement with Draximage, Inc. ("Draximage") to market and distribute BrachySeed
implants  for  prostate  cancer  therapy  in the  U.S.  Under  the  terms of the
agreement,  Draximage  will supply  radioactive  iodine and  palladium  seeds to
Cytogen in  exchange  for  product  transfer  payments,  royalties  on sales and
certain milestone  payments.  Cytogen paid Draximage  $500,000 upon execution of

                                      -66-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


the  contract  in 2000  and  $500,000  upon  the  first  sale of the  Iodine-125
BrachySeeds  in 2001.  These  payments have been recorded as other assets in the
accompanying  consolidated  balance  sheet (see Note 1) and are being  amortized
over the ten year term of the Draximage agreement.  Amortization of these rights
was  $93,000  and  $4,000  in  2001  and  2000,  respectively.  Pursuant  to the
agreement,  Cytogen will pay  Draximage  $1.0 million upon the first sale of the
palladium-103   BrachySeeds.   The  Company  launched  the  radioactive   iodine
BrachySeed in the U.S. in the first half of 2001.

5.  ACQUISITION OF PROSTAGEN, INC.

In June  1999,  Cytogen  reacquired  the rights  for  immunotherapy  to its PSMA
technology by acquiring 100% of the outstanding capital stock of Prostagen, Inc.
("Prostagen")  for 2,050,000  shares of Cytogen Common Stock,  plus  transaction
costs.   The  acquisition  was  accounted  for  using  the  purchase  method  of
accounting,  whereby the purchase price was allocated to the assets acquired and
liabilities assumed from Prostagen based on the respective estimated fair values
at the acquisition date. The excess of the purchase price over the fair value of
the net tangible assets of  approximately  $1.2 million was assigned to acquired
technology  rights and has been  recorded as a non-cash  charge to operations in
the accompanying  financial statements.  Acquired technology rights reflects the
value of the PSMA technology  development  projects  underway at the time of the
Prostagen acquisition.  The Company may issue up to an additional 450,000 shares
of Cytogen Common Stock upon the satisfactory  termination of lease  obligations
assumed in the Prostagen acquisition.

The Company had sublicensed PSMA to Prostagen for prostate cancer  immunotherapy
in 1996. In connection  with the  acquisition,  Cytogen  acquired  approximately
$550,000 in cash, a minority ownership in Northwest Biotherapeutics, Inc., which
is developing PSMA for dendritic cell therapy,  and a contract with Velos,  Inc.
for marketing a cancer  patient  software  management  program for hospitals and
health care payors. In addition,  the Company may issue up to an additional $4.0
million worth of Cytogen Common Stock if certain  milestones are achieved in the
dendritic cell therapy and PSMA development programs. The Company may also issue
up to 500,000 shares of Cytogen Common Stock upon beneficial resolution of other
contractual arrangements entered into by Prostagen.

6.  PROGENICS PHARMACEUTICALS, INC. JOINT VENTURE

In  June  1999,  Cytogen  entered  into a joint  venture  with  Progenics,  PSMA
Development Co. LLC (the "Joint Venture"), to develop vaccine and antibody-based
immunotherapeutic  products utilizing Cytogen's proprietary PSMA technology. The
Joint Venture is owned equally by Cytogen and Progenics.  Through November 2001,
Progenics  funded  the first  $3.0  million  of  development  costs of the Joint
Venture.  Beginning in December 2001, the Company and Progenics began to equally
share the future costs of the Joint  Venture.  Cytogen has the  exclusive  North
American marketing rights on products developed by the Joint Venture.

The  Company  accounts  for  the  Joint  Venture  using  the  equity  method  of
accounting.  As discussed above,  through November 2001, Progenics was obligated
to fund the initial $3.0 million of the development costs. Beginning in December
2001,  Cytogen began to recognize 50% of the Joint Venture's  operating results,
expected to be losses, in its consolidated statement of operations. For the year
ended  December 31, 2001,  Cytogen  recognized  $332,000 of these losses.  As of
December 31, 2001, the carrying  value of the Company's  investment in the Joint
Venture was $588,000 which represents  Cytogen's investment to date in the Joint
Venture,  less its cumulative share of losses,  which net investment is recorded
in other assets (see Note 1).

In connection  with the licensing of the PSMA technology to the Joint Venture in
June 1999, Cytogen recognized approximately $1.8 million in license fee revenue.
In connection with the adoption of SAB 101,  effective January 1, 2000 (see Note
1),  the  Company  deferred   approximately  $1.5  million  of  this  previously
recognized  license  fee and  recognized  $599,000  of the  deferred  revenue as
license  and  contract  revenue  in each of the  years  in 2001  and  2000.  The
remaining  $275,000 of deferred  revenue will be recognized  on a  straight-line
basis through June 2002, the estimated term of the development program.

7.  THE DOW CHEMICAL COMPANY

In 1993,  Cytogen  acquired from The Dow Chemical  Company  ("Dow") an exclusive
license for the  treatment  of  osteoblastic  bone  metastases  in the U.S.  for
Quadramet.  This license was amended in 1995 and 1998 to expand the territory to
include Canada, Latin America,  Europe and Japan, in 1996 to expand the field to
include all osteoblastic  diseases, and in 1998 to include rheumatoid arthritis.
The  agreement  also  requires  the  Company  to pay Dow  royalties  based  on a
percentage  of net  sales of  Quadramet,  or a  guaranteed  contractual  minimum
payments,  whichever is greater, and future payments upon achievement of certain
milestones.  The Company recorded  $824,000,  $802,000 and $500,000,  in royalty
expense for 2001, 2000 and 1999,  respectively.  Future annual minimum royalties
due to Dow are $1.0 million per year in 2002 through 2012.

                                      -67-
<PAGE>


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


8.  REVENUES FROM MAJOR CUSTOMERS

Revenues  from  major  customers  (greater  than 10%) as a  percentage  of total
revenues were as follows:

                                                         Year Ended December 31,
                                                         -----------------------
                                                           2001    2000    1999
                                                           ----    ----    ----
   Berlex Laboratories Inc...............................   20%     22%      9%
   Progenics Pharmaceuticals, Inc. (see Note 6)..........    5       6      16
   Mallinckrodt Medical Inc..............................   20      19      16
   Medi-Physics..........................................   12       7      15
   Syncor International Corporation......................   11      11      10


Mallinckrodt Medical Inc., Medi-Physics and Syncor International Corporation are
chains of  radiopharmacies,  which  distribute  ProstaScint  and OncoScint CR/OV
kits.

Revenues from Berlex and Progenics in 2001 and 2000 include the  recognition  of
deferred revenue following the adoption of SAB 101.

9.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                              December 31,
                                                              ------------
                                                          2001           2000
                                                          ----           ----
 Accounts payable.................................... $1,166,000     $2,700,000
 Accrued payroll and related expenses................    989,000      1,791,000
 Accrued research contracts and materials............    831,000        218,000
 Accrued commission and royalties....................    250,000        205,000
 Accrued professional and legal......................  1,061,000        755,000
 Facility payable....................................    462,000      1,125,000
 Other accruals......................................    556,000        424,000
                                                      ----------     ----------

                                                      $5,315,000     $7,218,000
                                                      ==========     ==========
10. LONG-TERM DEBT

                                                             December 31,
                                                             ------------
                                                          2001          2000
                                                          ----          ----

 Due to Elan Corporation, plc........................ $2,280,000     $2,280,000
 Capital lease obligations...........................     88,000        245,000
                                                      ----------     ----------
                                                       2,368,000      2,525,000
 Less:   Current portion.............................    (77,000)      (151,000)
                                                      ----------     ----------

                                                      $2,291,000     $2,374,000
                                                      ==========     ==========


In August  1998,  Cytogen  received  $2.0  million  from Elan  Corporation,  plc
("Elan") in exchange for a convertible  promissory note. The note is convertible
into shares of Cytogen Common Stock at $2.80 per share,  subject to adjustments,
and matures in August  2005.  The note bears annual  interest of 7%,  compounded
semi-annually, however, such interest is not payable in cash but is added to the
principal for the first 24 months;  thereafter,  interest is payable in cash. In
2001,  2000 and 1999, the Company  recorded  $160,000 and $141,000 and $146,000,
respectively, in interest expense on this note.


                                      -68-
<PAGE>


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


The Company leases certain equipment under capital lease obligations, which will
expire on various  dates  through  2004.  Property  and  equipment  leased under
non-cancellable capital leases have a net book value of $210,000 at December 31,
2001.  Payments to be made under  capital  lease  obligations  (including  total
interest of $11,000) are $85,000 in 2002, $9,000 in 2003 and $4,000 in 2004.

11. COMMON STOCK

In January 1999, the Company sold 2,666,667  shares of Cytogen Common Stock to a
subsidiary of The Hillman  Company for an aggregate  price of $2.0  million,  or
$0.75 per share.  Also in January,  the Company exercised a put right granted to
Cytogen  under a $12.0  million  equity  line  agreement  with an  institutional
investor,  for the sale of 475,342 shares of Common Stock at an aggregate  price
of $500,000 or $1.0519 per share.

In August  1999,  the Company sold to the State of  Wisconsin  Investment  Board
("SWIB")  3,105,590 shares of Cytogen Common Stock at an aggregate price of $5.0
million, or $1.61 per share.

In 2000,  the Company sold 1.0 million  shares of Cytogen Common Stock to Berlex
for  $1.0  million  or  $1.00  per  share  upon an  exercise  of a  warrant  and
approximately  1.7 million  additional  shares of Cytogen Common Stock for total
proceeds  of $3.5  million  at an  average  price of $2.12  per  share  upon the
exercises of employee stock options and other warrants.

In September 2000, the Company sold to Acqua Wellington North American  Equities
Fund, Ltd.  ("Acqua  Wellington")  902,601  registered  shares of Cytogen Common
Stock at an  aggregate  price of $6.0  million or $6.647  per share.  In October
2000,  the  Company  entered  into  an  equity  financing  facility  with  Acqua
Wellington  for up to $70  million  of  Common  Stock.  Under  the  terms of the
agreement,  Cytogen could, at its discretion, sell shares of its Common Stock to
Acqua  Wellington  at a small  discount  to the market  price.  Pursuant to this
Equity  Financing  Facility,  in  February  2001,  the  Company  sold  to  Acqua
Wellington  1,276,557  shares of its Common Stock at an aggregate  price of $6.5
million or $5.092 per share.  The Equity  Financing  Facility was  terminated in
June 2001.

In  June  2001,  the  Company  entered  into a  Share  Purchase  Agreement  (the
"Agreement")  with SWIB,  pursuant to which the Company sold 1,820,000 shares of
Cytogen  Common Stock to SWIB for an aggregate  purchase  price of $8.2 million,
before  transaction costs, or $4.50 per share. In connection with the Agreement,
the Company was required to discontinue the use of the Equity Financing Facility
and such agreement was terminated.

In January 2002,  the Company sold  2,970,665  shares of Cytogen Common Stock to
SWIB for an aggregate purchase price of $8.0 million or $2.69 per share pursuant
to a January 2002 Share  Purchase  Agreement  between  SWIB and the Company.  In
connection  with our stock  issuances to SWIB,  the Company  agreed not to enter
into equity line  arrangements in the future,  issue certain  securities at less
than fair market value or undertake  certain other securities  issuances without
requisite stockholder approval.

12. STOCK OPTIONS

The Company has various  stock  option  plans that  provide for the  issuance of
incentive  and  non-qualified  stock  options to purchase  Cytogen  Common Stock
("Cytogen   Options")  to   employees,   non-employee   directors   and  outside
consultants,  for which an aggregate  of  6,078,888  shares of Common Stock have
been  reserved.  The  persons to whom  Cytogen  Options  may be granted  and the
number,  type,  and terms of the Cytogen  Options vary among the plans.  Cytogen
Options  are  granted  with an exercise  term of 10 years and  generally  become
exercisable in  installments  over periods of up to 5 years at an exercise price
determined  either by the plan or equal to the fair market  value of the Cytogen
Common  Stock at the date of grant.  Under  certain  circumstances,  vesting may
accelerate. Activity under these plans was as follows:


                                      -69-
<PAGE>

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

<TABLE>
<CAPTION>

                                                                               Aggregate
                                        Number of            Price Range        Exercise
                                     Cytogen Options          Per Share          Price
                                     ---------------       --------------     -----------
<S>                                    <C>                <C>     <C>        <C>
Balance at December 31, 1998            6,042,295          $ 0.70 - 16.63     $15,449,915
   Granted                                536,155            0.95 -  2.67       1,068,223
   Exercised                             (231,842)           0.81 -  2.69        (306,507)
   Cancelled                           (1,266,609)           0.80 -  8.06      (5,963,368)
                                       ----------                             -----------

Balance at December 31, 1999            5,079,999            0.70 - 16.63      10,248,263
   Granted                              1,340,500            2.47 - 16.94       8,530,540
   Exercised                           (1,343,439)           0.83 - 16.63      (3,210,282)
   Cancelled                            (380,766)            0.95 - 16.94      (1,024,568)
                                       ---------                              -----------

Balance at December 31, 2000            4,696,294            0.70 - 16.94      14,543,953
   Granted                                747,360            2.56 -  6.13       2,845,773
   Exercised                             (130,904)           0.70 -  2.84        (217,478)
   Cancelled                             (370,269)           0.83 - 16.94      (1,627,480)
                                       ----------                             -----------
Balance at December 31, 2001            4,942,481          $ 0.70 - 16.94     $15,544,768
                                       ==========                             ===========
</TABLE>

The  following  table  summarizes  information  about  Cytogen  stock options at
December 31, 2001:
<TABLE>
<CAPTION>


       Outstanding Cytogen Stock Options                          Exercisable Cytogen Stock Options
------------------------------------------------       ----------------------------------------------------

                                Weighted-Average
                                   Remaining                                               Weighted-Average
   Range of          Outstanding  Contractual          Weighted-Average       Exercisable        Exercise
Exercise Prices        Shares        Life               Exercise Price           Shares           Price
---------------      ----------   -----------           --------------        -----------       --------
<S>                  <C>              <C>                   <C>                <C>               <C>
$ 0.70 - 1.83        2,348,452        6.6                   $ 1.09             1,510,052         $ 1.09
  1.84 - 3.67        1,363,896        8.1                     2.76               657,845           2.30
  3.68 - 5.50          418,300        7.0                     4.86               190,300           5.03
  5.51 - 7.33          251,333        5.9                     5.98               184,567           5.94
  7.34 - 9.17           45,500        4.8                     7.80                43,100           7.74
  9.18 -11.00          501,000        8.5                    10.14               167,067          10.14
 16.50 -16.94           14,000        1.9                    16.56                12,800          16.53
                     ---------                                                 ---------
$ 0.70 -16.94        4,942,481        7.2                   $ 3.35             2,765,731         $ 2.70
                     =========                                                 =========
</TABLE>

At December 31, 2001,  Cytogen Options to purchase  2,765,731  shares of Cytogen
Common Stock were  exercisable and 1,136,407 shares of Cytogen Common Stock were
available for issuance under  approved  plans of additional  options that may be
granted under the plans.

Included in the above  tables is a Cytogen  Option  granted to a key employee in
1998 to purchase  2,250,000  shares of Cytogen Common Stock at an exercise price
of $1.0937 per share, of which,  the vesting of 1,350,000  shares  ("Performance
Options") are subject to the completion of certain  performance based milestones
as determined by the Board of Directors (the "Board"). During 2000 and 1999, the
Board  approved  the  commencement  of vesting  for  225,000  and 675,000 of the
Performance Options,  respectively,  upon the achievement of certain milestones.
In 2000 and 1999, the Company  recorded $1.1 million and $84,000,  respectively,
of  deferred  compensation  related to the vesting of the  Performance  Options,
which  represents  the fair market value of Cytogen's  Common Stock in excess of
the exercise  price of the option on the date,  which the Board  determined  the
performance  milestones had been met.  Deferred  compensation is being amortized
over the three-year vesting period of the Performance Options.

AxCell, a subsidiary of Cytogen  Corporation,  also has a stock option plan that
provides  for the  issuance of  incentive  and  non-qualified  stock  options to
purchase  AxCell  Common  Stock  ("AxCell  Options")  to  employees,  for  which
2,000,000  shares of AxCell common stock have been reserved.  As of December 31,
2001, 8,000,000 shares of AxCell Common Stock are outstanding;  all of which are
held by Cytogen.  AxCell  Options are granted with an exercise  term of 10 years
and generally become  exercisable in installments  over periods of up to 5 years
at an exercise price  determined  either by the plan or equal to the fair market


                                      -70-
<PAGE>



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


value of AxCell Common Stock at the date of grant.  The Company  granted  AxCell
Options to purchase  438,365 and 229,028  shares of AxCell  Common  Stock during
2001 and 1999,  respectively.  The  exercise  prices  range  from $0.63 to $4.63
(weighted  average  of $3.69) in 2001 and $0.63 to $0.80  (weighted  average  of
$0.68) in 1999. As of December 31, 2001,  options to purchase  578,602 shares of
AxCell Common Stock were  outstanding,  of which 349,208 shares were exercisable
and 1,421,398 shares were available for future grant. During 2001, in connection
with the grant of AxCell Options, the Company recorded deferred  compensation of
$241,000, representing the estimated fair value of AxCell Common Stock in excess
of the exercise price of the options on the date such options were granted.  The
deferred compensation is being amortized over the vesting period of the options.

The  Company  adopted an  employee  stock  purchase  plan under  which  eligible
employees may elect to purchase  shares of Cytogen  Common Stock at the lower of
85% of  fair  market  value  as of the  first  trading  day  of  each  quarterly
participation  period,  or  as  of  the  last  trading  day  of  each  quarterly
participation period. In 2001, 2000 and 1999, employees purchased 12,869, 32,385
and 29,209 shares, respectively,  for aggregate proceeds of $28,000, $80,000 and
$29,000,  respectively.  The  Company  has  reserved  355,497  shares for future
issuance under its employee stock purchase plan.

The Company applies  Accounting  Principle Board Opinion No. 25, "Accounting for
Stock Issued to Employees,"  and the related  interpretations  in accounting for
its stock options to employees.  The Company follows the disclosure  requirement
of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation".  Had compensation cost of the Company's stock options
to employees  been  determined  under SFAS No. 123, the Company's net loss would
have been increased to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                         -----------------------
                                                                  2001            2000            1999
                                                                  ----            ----            ----

<S>                                                          <C>             <C>               <C>
Net income (loss), as reported                               $(12,100,000)   $(27,298,000)       $729,000
Pro forma net loss                                           $(17,423,000)   $(30,689,000)    $(1,103,000)

Basic and diluted net income (loss) per share, as reported         $(0.16)         $(0.37)          $0.01
Basic and diluted pro forma net loss per share                     $(0.22)         $(0.42)         $(0.02)
</TABLE>

The weighted  average fair value of the options  granted under the Cytogen stock
option plans during 2001,  2000 and 1999 is estimated as $3.07,  $5.40 and $1.29
per option,  respectively,  on the date of grant using the Black-Scholes pricing
model with the following  assumptions for 2001, 2000 and 1999: dividend yield of
zero,  volatility  of  124.95%,  120.39%  and  87.99%,  respectively,  risk-free
interest  rate of 4.55%,  5.98% and 5.85%,  respectively,  and an expected  life
ranging  from 4 to 5 years.  The average  fair value per option  ascribed to the
employee stock  purchase plan during 2001,  2000 and 1999 is estimated at $1.47,
$1.35 and  $0.40,  respectively,  on the date of grant  using the  Black-Scholes
option  pricing model with the following  assumptions  for 2001,  2000 and 1999:
dividend   yield  of  zero,   volatility   of  125.41%,   109.83%  and  111.48%,
respectively,  risk free interest rate of 4.12%, 5.52% and 4.46%,  respectively,
and expected  life of three  months.  The weighted  average fair value of AxCell
Options  granted  during  2001  and  1999  is  estimated  at  $4.06  and  $0.49,
respectively,  on the date of grant using the  Black-Scholes  pricing model with
the following  assumptions for 2001 and 1999: dividend yield of zero, volatility
of 124.91% and 88.61%, respectively, risk-free interest rate of 4.59% and 5.81%,
respectively, and an expected life of 5 years.

13. RELATED PARTY TRANSACTION

Consulting  services have been  provided to the Company under an agreement  with
the Chairman of the Board of Directors related to time spent in that function on
Company  matters.  Fees and expenses under this agreement were $53,000,  $54,000
and $136,000 in 2001, 2000 and 1999, respectively.

14. RETIREMENT SAVINGS PLAN

The  Company  maintains  a  defined  contribution  plan for its  employees.  The
contribution is determined by the Board of Directors each year and is based upon
a percentage of gross wages of eligible employees. The plan provides for vesting
over four years,  with credit  given for prior  service.  The Company also makes
contributions  under a  401(k)  plan in  amounts,  which  match up to 50% of the
salary  deferred  by the  participants.  Matching  is capped  at 6% of  deferred
salaries.  Total expense was $140,000,  $95,000 and $182,000 for 2001,  2000 and
1999, respectively.

                                      -71-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


15. INCOME TAXES

As of December 31, 2001, Cytogen had federal net operating loss carryforwards of
approximately $241 million.  The Company also had federal and state research and
development tax credit  carryforwards of approximately  $6.8 million.  These net
operating loss and credit  carryforwards  will expire through 2021. In addition,
certain operating loss and credit carryforwards began to expire in 1995.

The Tax Reform Act of 1986 contains provisions that limit the utilization of net
operating  loss and tax  credit  carryforwards  if there has been an  "ownership
change". Such an "ownership change", as described in Section 382 of the Internal
Revenue Code may limit the Company's  utilization  of its net operating loss and
tax credit carryforwards.

Deferred  income  taxes  reflect  the net tax  effect of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amount used for income tax  purposes.  Based upon the Company's
loss history, a valuation allowance for deferred tax assets has been provided:

<TABLE>
<CAPTION>

                                                                         2001              2000
                                                                         ----              ----
      <S>                                                          <C>                 <C>
      Deferred tax assets:
         Net operating loss carryforwards                          $  81,860,000       $ 74,800,000
         Capitalized research and development expenses                11,808,000         15,800,000
         Research and development credit                               6,800,000          6,800,000
         Acquisition of in-process technology                            720,000            800,000
         Other, net                                                    9,738,000          5,800,000
                                                                   -------------       ------------
              Total deferred tax assets                              110,926,000        104,000,000
              Valuation allowance for deferred tax assets           (110,926,000)      (104,000,000)
                                                                   -------------       ------------
                 Net deferred tax assets                           $           -       $          -
                                                                   =============       ============
</TABLE>

In 1995,  Cytogen acquired CytoRad and Cellcor,  both of which had net operating
loss carryforwards. Due to Section 382 limitations, approximately $10 million of
CytoRad and $12.0  million of Cellcor  carryforwards  may be available to offset
future  taxable  income.  A full  valuation  allowance  was  established  on the
acquisition dates as realization of these tax assets is uncertain.

During  2001  and  2000,  the  Company  sold New  Jersey  state  operating  loss
carryforwards and research and development credits, resulting in the recognition
of a $1.1 million and $1.6 million tax benefit, respectively.

16. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain  equipment  under  non-cancellable
operating  leases that expire at various  times  through  2006.  Rent expense on
these leases was $1.6 million, $1.3 million and $998,000 in 2001, 2000 and 1999,
respectively.  Minimum future  obligations  under the operating  leases are $1.7
million as of December  31, 2001 and will be paid as follows:  $748,000 in 2002,
$408,000 in 2003, $344,000 in 2004, $137,000 in 2005 and $104,000 in 2006.

The Company is obligated  to make minimum  future  payments  under  research and
development contracts that expire at various times. As of December 31, 2001, the
minimum future payments under contracts are $559,000 in 2002,  $213,000 in 2003,
$172,000 in 2004 and $130,000 each year from 2005 and  thereafter.  In addition,
the Company is obligated to pay  royalties on revenues from  commercial  product
sales including certain guaranteed minimum payments.

On March 17,  2000,  we were  served with a  complaint  filed  against us in the
United  States  Federal  Court  for  the  District  of New  Jersey  by M.  David
Goldenberg ("Goldenberg") and Immunomedics, Inc. (collectively "Plaintiffs") The
litigation claims that our ProstaScint  product  infringes a patent  purportedly
owned by Goldenberg and licensed to  Immunomedics.  We believe that  ProstaScint
does not infringe this patent, and that the patent is invalid and unenforceable.
In addition,  we have certain rights to  indemnification  against litigation and
litigation  expenses from the inventor of technology used in ProstaScint,  which
may be offset against royalty payments on sales of ProstaScint. In addition, the
patent sought to be enforced in the litigation has now expired; as a result, the
claim even if successful would not result in an injunction barring the continued
sale of ProstaScint or affect any other of our products or technology.  However,
given the uncertainty  associated with litigation,  we cannot give any assurance
that the  litigation  could  not  result  in a  material  expenditure  to us. On
December 17, 2001, we filed a motion for summary judgment of non-infringement of
the asserted  claims of the  patent-in-suit.  The Plaintiffs have indicated that
they will file a cross-motion  for summary judgment with their opposition to our
motion.  A hearing  on these  motions  is likely to take  place in the Spring of
2002.

                                      -72-
<PAGE>

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


17. CONSOLIDATED QUARTERLY FINANCIAL DATA - UNAUDITED

The following  table  provides  quarterly  data for the years ended December 31,
2001 and 2000.

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                            ------------------------------------------------
                                                             March 31,     June 30,    Sept. 30,    Dec. 31,
                                                               2001         2001         2001         2001
                                                            ----------     -------     ---------    --------

                                                              (amounts in thousands except per share data)

     <S>                                                    <C>          <C>          <C>          <C>
     Total revenues....................................     $  2,991     $  2,834     $  2,800     $  3,042

     Total operating expenses .........................        5,817        6,031        6,697        7,182
                                                            --------     --------     --------     --------

              Operating loss ..........................       (2,826)      (3,197)      (3,897)      (4,140)

     Other income, net ................................          172          112          118          455
                                                            --------     --------     --------     --------

              Loss before income taxes ................       (2,654)      (3,085)      (3,779)      (3,685)
     Income tax benefit ...............................             -           -            -       (1,103)
                                                            ---------    --------     --------     --------

         Net loss .....................................     $ (2,654)    $ (3,085)    $ (3,779)    $ (2,582)
                                                            =========    ========     ========     ========

         Basic and diluted net loss per share  ........     $  (0.03)    $  (0.04)    $  (0.05)    $  (0.03)
                                                            ========     ========     ========     ========

         Weighted average common share outstanding....        76,244       77,444       78,866       78,901
                                                            ========     ========     ========     ========
</TABLE>

                                      -73-

<PAGE>



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

<TABLE>
<CAPTION>


                                                                                  Three Months Ended
                                                                 ---------------------------------------------------

                                                                 March 31,      June 30,     Sept. 30,      Dec. 31,
                                                                   2000           2000          2000          2000
                                                                 --------       --------     ---------      --------

                                                                      (amounts in thousands except per share data)

         <S>                                                     <C>           <C>           <C>            <C>
         Total revenues.....................................     $  2,643      $  2,435      $  2,733       $  2,641

         Total operating expenses ..........................        4,500         4,951        19,340          6,881
                                                                 --------      --------      --------       --------

                   Operating loss ..........................       (1,857)       (2,516)      (16,607)        (4,240)

         Other income, net..................................          111           144           158            198
                                                                 --------      --------      --------       --------

                   Loss before income taxes and cumulative
                      effect of accounting change...........       (1,746)       (2,372)      (16,449)        (4,042)

         Income tax benefit ................................            -             -             -         (1,625)
                                                                 --------      --------      --------       --------
                   Loss before cumulative effect of
                      accounting change.....................       (1,746)       (2,372)      (16,449)        (2,417)
         Cumulative effect of accounting change ............       (4,314)            -             -              -
                                                                 --------      --------      --------       --------

         Net loss ..........................................     $ (6,060)     $ (2,372)     $(16,449)      $ (2,417)
                                                                 ========      ========      ========       ========

         Net loss per share:
              Basic and diluted net loss before cumulative
                 effect of accounting change ...............     $  (0.02)     $  (0.03)     $  (0.22)      $  (0.03)
              Cumulative effect of accounting change .......        (0.06)            -             -              -
                                                                 --------      --------      --------       --------

              Basic and diluted net loss ...................     $  (0.08)     $  (0.03)     $  (0.22)      $  (0.03)
                                                                 ========      ========      ========       ========

         Weighted average common shares outstanding ........       71,630        72,779        73,632         75,593
                                                                 ========       =======      ========       ========
</TABLE>

                                      -74-