CONFORMED COPY


                       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, 2000
                                              -----------------
                                       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, 2001, based on
$3.69 per share,  the last reported sale price on the NASDAQ  National Market on
that date, was $282 million.

The  number of  shares  of  Common  Stock,  $.01 par  value,  of the  registrant
outstanding as of March 1, 2001 was 77,380,205 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 2001
Annual Meeting of  Stockholders  are  incorporated by reference into Part III of
this Report.


<PAGE>




                                TABLE OF CONTENTS

   Item                                                                     Page
   ----                                                                     ----
PART I
   1.  Business.............................................................   1
   2.  Properties...........................................................  34
   3.  Legal Proceedings....................................................  34
   4.  Submission of Matters to a Vote of Security Holders..................  34

PART II
   5.  Market for the Company's Common Equity and Related
         Stockholder Matters................................................  35
   6.  Selected Financial Data..............................................  37
   7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations................................  39
   7A. Quantitative and Qualitative Disclosures about Market Risk...........  45
   8.  Financial Statements and Supplementary Data..........................  45
   9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure................................  45

PART III
   10. Directors and Executive Officers of the Company......................  46
   11. Executive Compensation...............................................  46
   12. Security Ownership of Certain Beneficial Owners and Management.......  46
   13. Certain Relationships and Related Transactions.......................  46

PART IV
   14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....  47

EXHIBIT INDEX...............................................................  47

SIGNATURES..................................................................  51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................................  53

<PAGE>
                                     PART I
Item 1.  Business

Business

Overview

Cytogen is an established  biopharmaceutical company with two principal lines of
business,  proteomics and oncology. We are extending our expertise in antibodies
and  molecular   recognition   to  the   development   of  new  products  and  a
proteomics-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
developing  a  proprietary  protein  pathway  database as a drug  discovery  and
development tool for the pharmaceutical and biotechnology industries.

Our cancer management business currently is comprised of four marketed products,
each  of  which  has  been   approved  by  the  United   States  Food  and  Drug
Administration (the "FDA"): ProstaScint(R),  a monoclonal antibody-based imaging
agent used to image the extent and spread of prostate cancer; BrachySeed(TM),  a
second generation  radioactive  implant for the treatment of localized  prostate
cancer; OncoScint(R) CR/OV, another monoclonal antibody-based imaging agent used
for the detection of colorectal and ovarian cancer;  and Quadramet(R),  a cancer
therapeutic  agent marketed for the relief of  cancer-related  bone pain. We are
evolving our cancer pipeline by exploiting PSMA,  which we exclusively  licensed
from Memorial  Sloan-Kettering  Cancer Center.  PSMA is a unique  membrane-bound
antigen highly expressed in prostate cancer cells and in the neovasculature of a
variety  of  other  solid  tumors,  including  breast,  lung and  colon.  We are
developing our PSMA  technology as part of our approach to offering a full range
of prostate cancer management  products and services  throughout the progression
of the disease, including gene-based immunotherapy vaccines,  antibody-delivered
therapeutic  compounds  and novel assays for  detection of primary and recurrent
prostate  cancer.  We  also  plan  to  apply  our  PSMA  technology,   including
therapeutics and in vitro  diagnostics,  toward other types of cancer based upon
our experience in prostate cancer, although we cannot be certain such technology
will  be  commercializable   in  such  areas.  Our  in  vivo   immunotherapeutic
development   program  is  being  conducted  in  collaboration   with  Progenics
Pharmaceuticals, Inc.

We also acquired rights to two product candidates pursuant to marketing, license
and supply  agreements that we entered into in 2000. Under such  agreements,  we
acquired  exclusive United States  marketing  rights to Combidex(R),  a magnetic
resonance  imaging contrast agent for the detection of lymph node metastases and
exclusive United States marketing rights to imaging agent Code 7228 for oncology
applications,  as well as an option  with  respect to other  applications  under
certain  circumstances.  Combidex has received an approvable letter from the FDA
for the detection of lymph node metastases.  We cannot assure you, however, that
the  licensor of Combidex and Code 7228 will  receive  approval  from the FDA to
market Combidex or Code 7228 in the United States.

Proteomics is the study of the expression, interaction and function of proteins.
Genomics is the study and identification of an organism's genetic makeup.  While
genomics provides  important  information  regarding genetic makeup, it does not
directly provide  information  regarding  protein  interactions and thus protein
function.  However,  genomics data can prove useful in proteomics  research as a
source of obtaining  complete  protein  sequences of ligands we have identified.
Public   availability  of  this  genomics   information   allows  for  effective
integration in our database of public and proprietary information. We recognized
in our past research that the key to  understanding  or developing  the means to
intervene in diseases was primarily based on understanding  protein interactions
rather  than  only  through  the use or study of  genomics.  We  undertook  this
approach on our own initiative and with our own funds.  Our proteomics  program,
under development by our subsidiary,  AxCell Biosciences Corporation, is focused
on the identification of protein interaction and signaling pathways within cells
as relating to disease processes and identification of novel drug targets.

We   utilize   our   proprietary   proteomics   technology   to  map   selective
protein-protein  interactions  and to develop a  database,  called  ProChart(TM)
(formerly called the Inter-Functional Proteomic Database, or IFP Database) which
includes  data  relating to protein  signaling  pathways  linked to a variety of
other  bioinformatic data. ProChart is designed to permit customers to integrate
existing  databases,  both public and proprietary,  with our proprietary data to
create a "virtual laboratory" on the computer desktop of researchers involved in
drug discovery.  We believe this database has significant  potential  commercial
value to the  pharmaceutical  and  biotechnology  industries  as a means of drug
target  identification,   validation,   screen  development  and  lead  compound
optimization  faster  and  cheaper  than  with  current   methodologies.   These
proprietary  technologies  are designed to provide a platform  from which we can
quickly and cost-effectively  determine  protein-protein  interactions and build

                                      -1-
<PAGE>

pathways of  intracellular  signaling data.  ProChart also offers a consolidated
platform to enable  statistical  and  mathematical  modeling of complex  protein
pathways.

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. The
Company's executive offices are located at 600 College Road East, Princeton, New
Jersey 08540 and its telephone number is 609-750-8200.

PROTEOMICS

We are developing a proprietary  protein pathway database called ProChart,  as a
discovery  and  development  tool  for  subscribers  in the  pharmaceutical  and
biotechnology  industries.  Our bioinformatics  platform is designed to identify
drug  targets  through  the  application  of our  novel,  innovative  and  rapid
techniques  for deriving  intracellular  protein  pathway data. We are designing
ProChart,  with our marketing partner InforMax,  Inc. (NASDAQ:  INMX), to permit
use of the Internet to integrate our proprietary  information  with a customer's
proprietary data and other information, including public genomics data.

Our technology may potentially  shorten the drug discovery  process by providing
efficacy  and  potential   toxicity   information   while   utilizing   existing
high-throughput  screening  instrumentation.  We believe that using ProChart may
permit  pharmaceutical  and biotechnology  companies to validate protein targets
for drug  discovery  faster and  cheaper  than with  current  methodologies.  In
addition,  we believe  that the  development  of the  database  will lead to the
identification  of  novel  proteins  that  we may  develop  exclusively  or with
partners.  We plan to offer customers multi-year  subscriptions to ProChart.  We
also plan to chart  increasingly  greater portions of the proteome and add these
results to ProChart.  Additionally,  we will price our ProChart database product
in relation to the amount and quality of  information  that  ProChart  provides,
thus  allowing us to  potentially  increase our price  structure as the database
grows.

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,  scientists  have  turned  to  genomics  as a means  of  better
understanding  the roots of disease.  Scientists  believed that a  comprehensive
knowledge of an  organism's  genetic  makeup would 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.

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.  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  proteomics
has the  potential  to  increase  substantially  the number of drug  targets and
thereby the number of novel new drugs.


                                      -2-

<PAGE>

The current environment

The drive to understand basic biological mechanisms has led to two distinct, yet
related,  approaches to the study of molecular biology, genomics and proteomics.
Genomics  is the study  and  identification  of an  organism's  genetic  makeup.
Proteomics is the study of protein  expression  and protein  interaction  within
cells.



Structural Genomics..>Functional Genomics......................................>
                                           Proteomics..........................>
--------------------------------------------------------------------------------
Technologies

ESTs                Transcript tagging     Protein chips       Protein chips
PCR                   techniques           MALDI-TOF           Systematic gene
Mapping             DNA arrays              Mass Spectrometry   knockouts
Positional cloning  Sequencing             Tandem Mass Spec    Transient gene
DNA sequencing      Bioinformatics           (LC-MS/MS-MS)      inactivation
DNA arrays          Gene expression        Giant 2-D gels      Transgenics
Bioinformatics                             Bioinformatics      Yeast 2- and 3-
                                                                hybrid
                                                               Phage display
                                                                (antibodies and
                                                                peptides)
                                                               Affinity assay
                                                                technologies
                                                               Bioinformatics
                                                               Algorithms

--------------------------------------------------------------------------------
Gene  -------->     mRNA  -------->        Protein  -------->   Biological
                                                                Activity

                                                              AxCell Biosciences



As seen above,  drug  discovery  research is in a  transition  from  emphasis on
structural  genomics,  to  functional  genomics,  to structural  proteomics  and
finally to functional proteomics.

The two main components of genomics research are structural and functional.  The
structural  effort is comprised of identifying  gene  sequences and  identifying
gene variants.  This research has primarily been  approached  through the use of
DNA  sequencing,  gene mapping and positional  cloning.  Identification  of gene
sequence  does not lead  directly  to targets for drug  discovery  but does give
information that is useful to functional genomics and proteomics. Identification
of gene variants can lead to targets for drug  discovery,  but for the most part
they lead to pathways associated with disease. Some of the protein components of
those pathways are the ultimate targets for drug discovery.

The functional  study of genomics  consists  primarily of gene  expression.  The
genes  expressed  in normal and  diseased  tissue  differ,  and gene  expression
techniques can comprehensively  distinguish between the two. Gene expression has
been studied using  gel-based and  chip-based  technologies.  Although the genes
expressed lead to potential  targets in the proteins for which they code,  there
are several limitations to consider:

     -  there may be no correlation between gene expression and protein
        production;

     -  interactions between proteins cannot be predicted; and

     -  gene expression cannot account for changes to the protein once the
        protein has been created.

Due to these limitations,  gene expression provides a limited explanation of the
biological function of proteins within cells.

Proteomics   research   efforts  can  also  be  categorized  as  structural  and
functional.  Structural proteomics,  or protein expression,  measures the number
and types of proteins existent in normal and diseased cells. Two-dimensional gel
electrophoresis  and mass  spectrometry  are the  primary  tools used in protein
expression  analysis.  This  approach is useful in  defining  the  structure  of
proteins in a cell.  Some of these  proteins may be targets for drug  discovery.
However, the role of the protein in the disease is still not defined.

Functional  proteomics  is the  study of  proteins'  biological  activities.  An
important  function of proteins is the transmission of biological  signals using
intricate  pathways  populated  by proteins  which  interact  with one  another.
Understanding the role proteins play in these signaling pathways allows a better
understanding  of  their  function  in  cellular  behavior.  Aberrations  in the
interaction of proteins with one another are at the heart of the molecular basis
of many diseases.  We believe  analysis of protein  pathways will identify those
proteins  that play a role in  causing or  preventing  disease.  Our  proteomics
business is focused upon this area.


                                      -3-
<PAGE>
The most widely  used  method for  studying  protein  interactions  is the yeast
two-hybrid system. We believe that this method has numerous limitations. We have
developed  a  different  and  proprietary  approach  to the study of  functional
proteomics.

--------------------------------------------------------------------------------
      The two-hybrid system                           Our system
      ---------------------                           ----------
--------------------------------------------------------------------------------

The rate of the throughput of the         We expect to measure in excess of
yeast two-hybrid system has been          15,000 interactions per day and
improved; however, the methodology        anticipate making significant progress
does not reach the throughput of our      in mapping the signaling pathways in
technology.                               the human proteome in the next 4
                                          years.



--------------------------------------------------------------------------------
The results of the yeast two-hybrid       Results are passed through a series
method may be misleading, because         bioinformatic filters, such as
the interactions determined using         affinity and tissue expression, to
this method are cells.                    better determine biologically
                                          significant interactions.

--------------------------------------------------------------------------------
Researchers must possess knowledge        Knowledge of a protein's role in a
about a protein's role in a signaling     signaling pathway is determined
pathway prior to using this system.       through the application of our system.

--------------------------------------------------------------------------------


We  believe  our  approach  to  detecting  protein  pathways  has the  following
additional   distinct  advantages  compared  to  the  yeast  two-hybrid  system:
simplicity,  higher  throughput  data  generation,  direct  protein  interaction
measurement,   fewer  false  positives,   rapid  formatting  of  high-throughput
screening  assays  and  identification  of  specific  ligands,  which  provide a
starting point for rational drug design.


                     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 may be facilitated by the use of ProChart.
We  anticipate  that  ProChart  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  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.


                                      -4-

<PAGE>

Background

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.

Our technology

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.

                   [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.


                                      -5-
<PAGE>

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.   ProChart  will  contain  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.  These models
will be made available as tools within ProChart to our subscription customers.

Our proteomics products

ProChart

We intend to offer our proprietary  proteomics  technology to pharmaceutical and
biotech companies through the following products and services:

ProChart  is designed  to offer  customers  the  opportunity  to  evaluate  many
proteins at once by  overlaying  protein  pathway data with other  bioinformatic
information in a rational and user friendly  format.  We believe that users will
be able to visualize  and  correlate  protein  pathway  data with all  sequence,
expression,  tissue distribution,  structural and bibliographic information that
exists for that  particular  protein and  pathway.  ProChart can also be used to
generate  protein  pathway  information  according  to  a  customer's  needs  or
interests.  The end result is that  companies  can  evaluate  a large  number of
targets  and  rationally  select  a  subset  with  which  they  can  advance  to
experimentation.  This database is also designed to allow a researcher to define
the best point for  intervention  in a protein  pathway to  maximize  beneficial
pharmacological effects while minimizing potential toxicity.

As an example  of the above  described  usages,  AxCell's  bioinformatics  staff
compared publicly available single nucleotide  polymorphisms  (SNPs) information
(single base pair  changes in DNA) from the Human Genome  Project to ProChart to
determine if such changes translate into functional  changes,  or differences in
the way proteins bind with one another.  Such  aberrations  in protein  pathways
reflect the molecular  basis of many diseases,  and may lead to discovery of new
drug  targets.  This may also  allow  AxCell to develop  proprietary  targets or
license targets as an additional way to commercialize its proteomics technology.

Novel Protein Targets

We view proteins by their modular  building  blocks or domains.  Every signaling
protein can be defined by its domain  composition  and this  composition  can be
compared  to  known  proteins  to  determine  if a  protein  represents  a novel
composition  of matter.  The figure  below gives an example of a known  protein,
which  consists of two domain 1s and one domain 2. Also shown are several  novel
proteins,  such as Novel 2,  which is made up of five  domain  Cs.  Since we are
measuring  domain-ligand  interactions,  we not only define the protein but have
knowledge of the protein's  function.  This method of defining proteins has been
used by us in a composition of matter patent covering novel WW-domain-containing
proteins.


                            MODULAR VIEW OF PROTEINS

Known Protein  Domain 1 -- Domain 2 -- Domain 1--

Novel 1        --Domain A -- Domain A -- Domain B -- Domain B

Novel 2        - Domain C -- Domain C -- Domain C -- Domain C -- Domain C

Novel 3        --- Domain B -- Domain B -- Domain B -- Domain B -- Domain B



In the  course  of  identifying  pathways  to  create  ProChart,  we  anticipate
discovering  and,  where  appropriate,   filing  patent  applications  on  novel
proteins.  We believe that some of these proprietary  proteins will be important
biological  targets.  In these  instances,  we will offer  those  targets to our
customers for licensing fees, milestone payments and royalty payments.


                                      -6-
<PAGE>
Protein Arrays

We plan to sell defined sets of known protein families,  or protein arrays,  for
use in lead optimization. The signaling proteins in ProChart are organized based
on their  domains.  Domains  are  interaction  modules,  or  defined  structural
recognition  regions on  proteins,  which are the sites of specific  interaction
between one  protein  and  another.  These  domains  are the parts of  signaling
proteins  where a drug may interact and alter a pathway.  There are estimated to
be 60 to 80 domain families in signaling  pathways.  Each family may have 100 to
300 members.  Customers who identify  potential  targets in ProChart  based on a
specific  interaction  involving a  particular  domain  will need that  physical
protein for  screening.  They will also need the other family members which have
that domain in common.  The  relative  degrees of binding to these other  family
members represent the toxicity and possible side effects of a drug candidate.

In the course of generating data for ProChart,  we completed mapping the protein
interactions for the known proteins of the WW domain family. This represents the
first  family of  protein  domains  for which an  entire  target  array has been
mapped.  This array may be useful in developing  optimized drugs for diseases is
which the WW family has been implicated such as hypertension, muscular dystrophy
and certain immunodeficiencies.

We plan to chart the entire human proteome of  intracellular  protein  signaling
pathways.  Our existing  robotics  systems are designed to permit  generation of
approximately  15,000  data  points per day. We  anticipate  making  significant
progress in mapping  the  signaling  pathways in the human  proteome in the next
four years. We intend to sell multi-year  subscriptions  to  pharmaceutical  and
biotechnology companies, pricing the product according to market receptivity and
the nature and quantity of information it contains.

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 are also
developing  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 lead in marketing 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 plan to  market  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
successfully   integrated.   These   subscriptions  may  include   collaborative
bioinformatics  research projects to analyze specific pathways as requested by a
customer.  Such collaborations would typically provide additional revenues,  and
could also  include  milestone  payments  and  royalty-based  revenues  from any
products emerging from the collaborative research and developed by our partner.

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.

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.

                                      -7-
<PAGE>

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.

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 seven 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.

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.

                                      -8-
<PAGE>

Other Initiatives

We  previously  announced an intention to enter into a proteomics  collaboration
with the Institute for Systems Biology. These collaborative efforts are still in
the preliminary phases.

We executed a  Materials  Transfer  Agreement  with the Fred  Hutchinson  Cancer
Research Center  pursuant to which AxCell obtained the Center's  prostate cancer
related cDNA libraries for research purposes.

Our  scientific  plan  to  investigate   potential  synergies  between  AxCell's
technology and Molecular  Staging,  Inc.'s ("MSI") Rolling Circle  Amplification
Technology has been postponed. AxCell will continue to explore opportunities for
scientific collaboration with MSI going forward.

ONCOLOGY

Background

Cancer  encompasses  a large  number of  discrete  diseases  that  afflict  many
different  parts of the human body.  The diversity of cancer  diseases and their
overall prevalence creates a large need for new and improved treatments.  Cancer
is the second leading cause of death in the United States, accounting for one of
every  four  deaths in the  United  States.  According  to the  American  Cancer
Society, about 1,220,100 new cancer cases were expected to be diagnosed in 2000.
Since 1990,  approximately 13 million new cancer cases have been diagnosed.  The
National  Institute of Health estimates  overall annual direct medical costs for
cancer at over $100  billion.  Treatment of breast,  lung and  prostate  cancers
account  for  over  half of these  direct  medical  costs.  This  market  is not
saturated  and novel  treatments  often enjoy  premium  pricing and rapid market
acceptance.   Fundamentals  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   oncology   healthcare
        professionals  which we believe allows a smaller sales force to be
        effective.

We develop,  commercialize  and market  products to improve  the  diagnosis  and
treatment of cancer.  We were  founded  based upon our  knowledge of  monoclonal
antibodies.  Our research efforts in this area led to our marketed products.  In
the  development  of our  current  products,  we  also  developed  expertise  in
molecular  recognition  and in  linking  radioisotopes  to  carriers,  including
antibodies, for diagnostic and therapeutic purposes. We also developed expertise
with nuclear imaging, including training of technicians and physicians, utilized
for diagnostic  purposes.  We have applied this knowledge primarily in the field
of prostate cancer, and for imaging/diagnostic agents for colorectal and ovarian
cancers. Our historical knowledge led to research programs,  both internally and
in collaborations with academic and scientific institutions,  in which we gained
additional knowledge about antibodies, proteins, identification and synthesis of
novel proteins,  and antigens located by those  compounds.  We plan to apply our
research and development  experience,  coupled with our  proprietary  technology
rights,  to  build  an  oncology  business  for an  integrated  approach  in the
intervention  and  progression of disease.  We now have an established  in-house
sales   force,   consisting   of   experienced    salespersons   and   technical
representatives.  We intend to use this sales force to sell current products and
any products which we develop or acquire.


                                      -9-
<PAGE>
<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 pending
                   prostate cancer              in Canada

----------------------------------------------------------------------------------------------------------
BrachySeed(TM)     Treatment of localized       Iodine approved and           Cytogen (United States)
                   tumors such as tumors of     marketed in the United
                   the neck, lung, pancreas,    States
                   breast, uterus and prostate

                                                Palladium to be submitted
                                                for approval in second
                                                quarter of 2001
----------------------------------------------------------------------------------------------------------
OncoScint CR/OV    Monoclonal antibody          Approved for sale in eleven   Cytogen (United States and
                   diagnostic imaging agent     European countries and        Canada)
                   for spread of colorectal     Canada. Approved in the
                   and ovarian cancer           United States

----------------------------------------------------------------------------------------------------------
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 Refractory      Evaluating Phase I results    Berlex (United States);
                   Rheumatoid Arthritis                                       Cytogen has marketing rights
                                                                              in Canada, Europe, Japan and
                                                                              certain other countries
                   ---------------------------------------------------------------------------------------
                   Treatment of disease         Phase III                     Berlex (United States);
                   progression by use of                                      Cytogen (Canada)
                   Quadramet, prior to onset
                   of pain

----------------------------------------------------------------------------------------------------------
PSMA Development   In vivo immunotherapeutic    Pre-clinical development      Progenics/Cytogen LLC
                   product for cancer vaccine
                   utilizing gene and
                   protein-based therapy
                   ---------------------------------------------------------------------------------------
                   Prostate cancer              Pre-clinical development      Progenics/Cytogen LLC
                   antibody-based therapy
                   ---------------------------------------------------------------------------------------
                   In vitro diagnostic tests    Development of a trial assay  Cytogen to market
                   for prostate cancer
                   ---------------------------------------------------------------------------------------
                   Ex vivo  dendritic  cell     Phase  I/II 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 overexpressed  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. When PSMA was compared to various PSA tests, the
presence  of PSMA was a more  accurate  guide of the extent of cancer.  However,
there  are  currently  no  commercially  available  assays  for  PSMA.  Memorial
Sloan-Kettering  Cancer  Center  identified  PSMA  using a  monoclonal  antibody


                                      -10-

<PAGE>

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.

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 e.g., breast, colon, etc.

The joint  venture is owned  equally by  Progenics  and us. We have  exclusively
licensed to the joint venture certain immunotherapeutic applications of our PSMA
patents  and  know-how.  Progenics  will fund up to $3 million  of  pre-clinical
development  costs of the program,  which we anticipate will be adequate to fund
the project through the pre-clinical stage. We and Progenics will share 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 remaining revenues equally with Progenics on any products developed by
the venture.  In  connection  with the  licensing of the PSMA  technology to the
joint venture,  we will receive $2 million in payments,  of which $1 million was
received  during 1999 and $500,000 during 2000, and the balance will be received
by the end of 2001. We have exclusively licensed in vivo immunotherapy rights to
PSMA to this joint venture.

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  Biotherapetics 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.  Our joint  venture  agreement  with  Progenics  required that we
reacquire our PSMA manufacturing rights by June 15, 2000, or the following would
occur: (i) Progenics will acquire co-exclusive marketing rights with us; (ii) we
will be  obligated  to  contribute  up to an  additional  $500,000  to the joint
venture to fund  research and  development;  and (iii)  Progenics'  research and
development expense obligation will be reduced to $2.5 million. We and Progenics
are  reviewing  the  timing  and  nature  of  actions  taken   regarding   these
manufacturing  rights in order to determine the parties'  prospective rights and
obligations under the joint venture agreement.

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 anticipate  initiating a clinical  trial of the
PSA assay and determining  proof of concept for the PSMA test next year. We also
plan to deploy such assays for  diagnosis of other tumors where PSMA is found in
associated neovasculature.


                                      -11-

<PAGE>

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  diagnosis,  monitoring and screening
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  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 is expected  that this market will 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.  Our goal is to
develop an ultra-sensitive PSA test utilizing novel amplification  technologies,
initially targeted for the recurrent disease setting.

A serum  test  for  PSMA,  representing  a novel  marker  associated  with  more
aggressive disease, is anticipated to provide more relevant prognostic value and
improve the accuracy of evaluating prostate cancer. We anticipate providing both
tests together on a new diagnostic chip.

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 advanced  prostate
cancer  and for  prevention  of  recurrent  disease by  eliminating  metastases.
Because PSMA has been identified as a unique antigen linked to prostate  cancer,
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.

                                      -12-
<PAGE>

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  radio-labeled
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
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.  We
believe that the  potential  market for  ProstaScint  is over $60 million in the
United States.

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.  There  are no other  agents
approved for the imaging and diagnosis of prostate cancer.

OncoScint CR/OV

OncoScint  CR/OV is approved  by the FDA for single use 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 yet been widely  adopted 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

                                      -13-
<PAGE>

than the OncoScint CR/OV scan. Consequently,  we are deemphasizing the marketing
of OncoScint  CR/OV for  colorectal  cancer and focusing on its use in recurrent
ovarian cancer which impacts approximately 16,800 women annually.

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.

According to American Cancer Society and National Cancer  Institute  statistics,
approximately  600,000 new cases of cancer that  typically  metastasize  to bone
occurred in the United  States in 1997.  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  $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.

Berlex has  initiated a Phase III B clinical  trial to evaluate the extension of
the use of Quadramet to patients  whose bone  metastases  can be  visualized  on
conventional  bone  scan,  but  who are not yet  experiencing  pain  from  these
metastases.  We believe  earlier use in the care of cancer patients could expand
the potential  market for Quadramet  significantly.  Our  continuation  of these
trials  will  depend  upon their  progress  and  success  of the  trial,  and on
decisions by our marketing partner Berlex to continue to fund the trial. If this
trial is successful, we plan to seek expansion of the FDA approved indication of
Quadramet for this therapeutic use in delaying progression of the onset of pain.
Realization of the full market  potential of Quadramet is dependent on realizing
this expanded indication.

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

The first  non-cancer use of Quadramet under  investigation  is the treatment of
patients with refractory rheumatoid  arthritis.  We believe Quadramet can target
the diseased  joints and provide a high but  localized  dose of radiation to the
area which may relieve the symptoms of refractory rheumatoid  arthritis.  We are
determining  how to proceed with this possible use based upon analyzing the data
from a recently completed Phase I dose escalation study.

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

                                      -14-
<PAGE>

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 by 95% 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.

Later  this year or early  next  year,  Draxis  plans to supply  Cytogen  with a
second-generation  palladium-based  seed.  The  more  energetic  radiation  from
palladium  is thought to be suitable  for certain  aggressive  forms of prostate
cancer.

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.

During 2000, the Company  terminated its 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, 2000, 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 is under expedited review with approval  expected by
the second  half of 2001.  We believe  these  products  may be marketed to major
cancer centers in Canada and will not require a significant  level of resources.
However,  we cannot be certain that ProstaScint will be approved in Canada, 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.

In June 2000, we filed  applications for regulatory  approval for ProstaScint in
Europe.  We received a review of our application in November 2000 and we will be
submitting a response  thereto by the end of the second  quarter of 2001. We are
currently assessing the viability of European marketing of ProstaScint.

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

                                      -15-

<PAGE>

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 caregiving  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

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 January
2001. We cannot be certain,  however, of the market acceptance of the product or
whether this product will significantly increase our revenues.

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,  recently received an
approvable letter 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.  There can be no  assurance  that  Advanced  Magnetics  will  receive  FDA
approval to market Combidex or Code 7228 in the United States.

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 gene-based approach.  Our current plans are that this approach,  if successful
in  pre-clinical  development,  should  proceed to clinical  trials in 2002.  We
cannot, however, assure you that pre-clinical  development will be successful or
that any  products  will  proceed to  clinical  trials.  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.


                                      -16-
<PAGE>
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 next year.

Elan Corp. 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.

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, 2000, 1999 and
1998,  revenues related to ProstaScint  accounted for approximately 66%, 57% and
32%,  respectively,  of our total revenues  while revenues  related to Quadramet
accounted  for  approximately  19%,  9% and  17%,  respectively,  of  our  total
revenues.

RESEARCH AND DEVELOPMENT

Our research and  development  expenditures  include  projects we conducted  and
payments we made to customer  sponsored  research  programs,  which for the past
three years have been  immaterial.  Our expenses  for  research and  development
activities, including customer sponsored programs, were:

     -  2000 -- $7.0 million

     -  1999 -- $3.8 million

     -  1998 -- $10.0 million

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 in our research and development  expenditures
during 2000 for development of proteomics technology,  for development of assays
utilizing  PSMA  for  diagnostics,  and  for  our  share  of  expenses  for  the
development with Progenics Pharmaceuticals, Inc. of immunotherapies for prostate
and other cancers and the acquisition of Combidex and Code 7228.

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

                                      -17-

<PAGE>
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.  The Company  believes that competition for its 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
those of the Company, 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  are
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").  We have access to
the facility for continued  manufacture of these products until January 2002. 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. Purdue's facility is subject to routine inspections by the FDA to
assure compliance with current Good Manufacturing  Practices.  As a result of an
inspection  held in April through May of 1999,  Cytogen  received an FDA Warning
Letter  which  identified  a number  of  deviations  from FDA  requirements  and
required their correction.  We have adopted corrective  measures for each of the
concerns  identified  and in  January  2000 we  received  a letter  from the FDA
informing us that our corrective  actions appeared to be adequate.  A subsequent
inspection in July 2000  reaffirmed this  corrective  action program.  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 do not  anticipate,
however, that this arrangement will be continued after January 2002.

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  for testing and
evaluation  purposes which Cytogen  intends would replace the  arrangement  with
Purdue,  with respect to ProstaScint and OncoScint CR/OV, prior to January 2002.
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,
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. The failure by the
Company to negotiate a supply  agreement on commercially  reasonable  terms will
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

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 the Company's  business,  financial  condition and results of
operations.

Raw materials and suppliers

The  active raw  materials  used for the  manufacture  of our  products  include
antibodies.  OncoScint CR/OV uses a monoclonal  antibody which is being supplied
in commercial quantities by a single contract manufacturer,  Lonza Biologics. We
anticipate  that  our  existing  supply  will  be able to  meet  our  needs  for
commercial  quantities of monoclonal  antibody for the foreseeable future in the
United States.

We currently  have  arrangements  necessary for the production of the monoclonal
antibody for ProstaScint.

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

                                      -18-
<PAGE>
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 39 current United States patents and 40 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 seven 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.

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

                                      -19-
<PAGE>
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. See Item 3. Legal Proceedings.

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.
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,

                                      -20-
<PAGE>
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.

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.

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

                                      -21-

<PAGE>
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, 2000,  we received 52% of our total  product
related,   license  and  contract   revenues   from  three   customers,   Berlex
Laboratories,  Inc. (22%) and the radiopharmacy chains of Mallinckrodt  Medical,
Inc. (19%) and Syncor International Corporation (11%).

EMPLOYEES

As of March 1, 2001, we employed 82 persons,  77 of which are employed full-time
and 5  part-time.  Of such 82  persons,  28 were in our  proteomics  subsidiary,
Axcell, 4 in regulatory,  4 in clinical  activities,  18 in  administration  and
management,  and 28 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  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,  the  Company's  business,
financial  condition and operating  results could be significantly and adversely
affected.  If that  happens,  the  price of the  Company's  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
$27.3 million during 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 accounting change following
the adoption of Securities and Exchange Commission Staff Accounting Bulletin No.
101. We had net income of $729,000 during the year ended December 31, 1999 which
included  certain  non-operating  gains and we had net  losses of $13.2  million
during the year ended December 31, 1998. The Company had an accumulated  deficit
of $328.6 million as of December 31, 2000. In order to develop and commercialize

                                      -22-
<PAGE>
our technologies,  particularly our 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 BrachySeed,  ProstaScint  And
Quadramet For Near-Term Revenues.

ProstaScint  and Quadramet are expected to account for a significant  percentage
of our product-related  revenues in the near future. For the year ended December
31, 2000,  revenues from ProstaScint and Quadramet  accounted for  approximately
95% 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
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, BrachySeed or Quadramet will
achieve  market  acceptance  on a  timely  basis,  or at  all.  If  ProstaScint,
BrachySeed or Quadramet do not achieve broader market acceptance,  we may not be
able to generate sufficient revenue to become profitable.

Our Proteomics Program Is At An Early Stage Of Development.

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.

                                      -23-
<PAGE>
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 its existing or future technologies, including databases.

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

There Is A Limited Market For Our 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 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;

     -  our 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 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

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

                                      -24-
<PAGE>
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 its 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.  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.

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;

                                      -25-
<PAGE>
     -  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
        its potential new products.

Our  objectives  include  developing  our  PSMA  technology  into  novel  cancer
therapeutics,   including  a  cancer  vaccine.  To  our  knowledge,   no  cancer
therapeutic  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
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.

                                      -26-
<PAGE>
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 its 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;

     -  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

                                      -27-
<PAGE>
     -  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  it.  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  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 its 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.

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, 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

                                      -28-
<PAGE>

commercially  reasonable  terms,  if at  all.  The  failure  by the  Company  to
negotiate a long term supply  agreement on  commercially  reasonable  terms will
have a material adverse effect on the Company's  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.

If We Are Unable To Comply With Applicable Governmental Regulations,  It 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 its technology,  and
civil and criminal penalties.  We cannot assure you that it 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.

                                      -29-
<PAGE>

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  its  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 it. 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.

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  Cytogen's  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.

                                      -30-
<PAGE>

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 exceeds  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 and federal  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,  it could be liable
for  damages,  penalties  or other  forms of censure and our  business  could be
significantly and adversely affected.

Protection Of Our Intellectual Property Is Difficult To Obtain.

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
it is  required  to  defend  itself in patent  suits by third  parties  or if it
initiates  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

                                      -31-
<PAGE>

     -  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
information to anyone outside Cytogen. 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 litigation  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 it believes 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 goodwill and other 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;

                                      -32-
<PAGE>

     -  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
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 Common Stock already  outstanding,  or issuable upon
exercise of options and warrants,  are eligible for resale,  which may adversely
affect  the  market  price of the  Common  Stock.  As of March 1,  2001,  we had
77,380,205 shares of Common Stock outstanding. An additional 4,983,263 shares of
Common Stock are issuable  upon the exercise of  outstanding  stock  options and
warrants.  Substantially all of such shares subject to outstanding options will,
when issued upon exercise  thereof,  be available  for  immediate  resale in the
public market pursuant to currently effective registration  statements under the
Securities Act of 1933 (the "Securities  Act"), as amended,  or pursuant to Rule
701 promulgated thereunder.

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  payments  upon the  happening  of  certain
events.

Berlex  Laboratories,  Inc.  exercised its  registration  rights with respect to
1,000,000 shares of Common Stock and the Company is  contractually  obligated to
register these shares. A registration statement with respect to these shares was
filed on April 11, 2000 and declared effective April 27, 2000. Such registration
statement  also covered  86,394 shares of Common Stock  issuable to  consultants
upon exercise of warrants.

In  addition,  on March 28,  2000,  we filed with the  Securities  and  Exchange
Commission a shelf  registration  statement on Form S-3 which initially  covered
six million (6,000,000) shares of our Common Stock. 1,500,000 of such registered
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 shares,  also registered on this Form S-3  Registration  Statement,  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.  In
addition,  902,601 of such  shares have been  issued to Acqua  Wellington  North

                                      -33-
<PAGE>

American Equities Fund, Ltd. ("Acqua Wellington").  Also, on October 9, 2000, we
entered into an equity financing  facility  pursuant to which we may issue up to
$70,000,000 in shares of our Common Stock to Acqua  Wellington from time to time
prior to June 9, 2002,  which shares would be sold at a small discount to market
price,  as  determined  prior to each  such  sale,  and  registered  under  such
registration  statement.  As of March 1, 2001, 1,276,557 shares have been issued
therewith.

Availability  of a  significant  number of  additional  shares could depress the
price of the Company's 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.

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.

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,  the Company  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. 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.

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

None.


                                      -34-
<PAGE>
                                    PART II

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

Cytogen's 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 Cytogen's 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.

1999                                                        High           Low
----                                                        ----           ---
First Quarter............................................   1.47           0.81
Second Quarter...........................................   1.97           0.88
Third Quarter............................................   2.22           1.38
Fourth Quarter...........................................   3.22           1.38

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


As of March 1, 2001,  there were  approximately  4,319  holders of record of the
Common  Stock and there  were  approximately  54,054  beneficial  holders of the
Common Stock.

Cytogen  has never  paid any cash  dividends  on its  Common  Stock and does not
anticipate  paying any cash  dividends  on its Common  Stock in the  foreseeable
future.  The Company currently intends to retain any future earnings to fund the
development  and  growth  of  its  business.  Any  future  determination  to pay
dividends will be at the discretion of the Company's board of directors.

The following  information  relates to all securities of the Company sold by the
Company during the year ended December 31, 2000 which were not registered  under
the Securities Act as of the date of issuance:

1. On July 10, 2000, the Company  issued  options to purchase  300,000 shares of
the Company's Common Stock to Lawrence Hoffman, the Company's Vice President and
Chief Financial Officer,  pursuant to the terms of a Non-Qualified  Stock Option
Agreement by and between the Company and Mr. Hoffman (the "Hoffman  Agreement").
Such options are  exercisable at $10.141 per share,  expire on July 10, 2010 and
vest at a rate of 33.3% per year beginning July 10, 2001.

The  Hoffman  Agreement  was  consummated  as an  incentive  for  and  upon  the
commencement of Mr. Hoffman's employment with the Company.

Such  300,000  shares  of  Common  Stock  were  subsequently   registered  on  a
Registration  Statement  on Form S-8 (File  No.  333-48454)  (the  "Registration
Statement on Form S-8"), filed with the Commission on October 23, 2000.

2. On July 11, 2000, the Board of Directors of the Company  revised the terms of
a Non-Qualified  Stock Option Agreement by and between the Company and H. Joseph
Reiser, the Company's President and Chief Executive Officer, which agreement was
initially  executed  on August 24,  1998,  with  respect to options to  purchase
2,050,000  shares of the Company's Common Stock (the "Reiser  Agreement").  Such
options are  exercisable  at $1.0937 per share,  expire on August 24, 2008,  and
vest according to the following schedule:

                                      -35-

<PAGE>


Option Amount              Vesting Date
-------------              ------------

100,000                 November 17, 1998
150,000                 May 18, 2000
300,000                 August 24, 2000
75,000                  November 22, 2000
150,000                 May 15, 2001
150,000                 May 18, 2001
300,000                 August   24, 2001
75,000                  November 22, 2001
150,000                 May 15, 2002
150,000                 May 18, 2002
75,000                  November 22, 2002
150,000                 May 15, 2003
225,000                 Subject to additional approval of the Board of Directors


The  Reiser  Agreement  was  consummated  as  an  incentive  for  and  upon  the
commencement of Mr. Reiser's employment with the Company.

Such  2,050,000  shares of Common  Stock  were  subsequently  registered  on the
Registration Statement on Form S-8.

No underwriter  was employed by the Company in connection  with the issuance and
sale of the securities described above. The Company claims that the issuance and
sale of all of the  foregoing  securities  were exempt from  registration  under
either (i) Section 4(2) of the Securities Act as transactions  not involving any
public offering,  or (ii) Rule 701 under the Securities Act as transactions made
pursuant  to a  written  compensatory  benefit  plan or  pursuant  to a  written
contract  relating to  compensation.  Appropriate  legends  have been or will be
affixed to the stock certificates  issued in such  transactions.  All recipients
had adequate access to information about the Company.





                                      -36-

<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, 2000,  which have been audited by Arthur  Andersen
LLP, the Company's  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,
                                                                              -----------------------
                                                              2000         1999       1998        1997        1996
                                                              ----         ----       ----        ----        ----
<S>                                                         <C>         <C>         <C>         <C>         <C>
Statements of Operations Data:                                  (All amounts in thousands, except per share data)
Revenues:
    Product sales ......................................... $  7,424    $  6,971    $  8,976    $  5,252    $  1,507
    Royalties .............................................    2,004       1,060       1,664       3,282          --
    License and contract ..................................    1,024       3,171       9,239       5,886       4,223
                                                            --------    --------    --------    --------    --------

      Total revenues ......................................   10,452      11,202      19,879      14,420       5,730
                                                            --------    --------    --------    --------    --------

Operating Expenses:
   Cost of product and contract
      manufacturing revenues (1) ..........................    4,414       4,111      12,284      5,939           --
   Research and development ...............................    6,957       3,849       9,967     17,913       20,539
   Acquisition of marketing and technology rights (2) .....   13,241       1,214          --         --           --
   Selling and marketing ..................................    6,126       4,210       5,103      5,492        4,143
   General and administrative .............................    4,934       3,501       7,420      6,871        5,494
   Equity loss in Targon subsidiary .......................       --          --       1,020      9,232          288
                                                            --------    --------    --------   --------     --------


      Total operating expenses ............................   35,672      16,885      35,794     45,447       30,464
                                                            --------    --------    --------   --------     --------

      Operating loss ......................................  (25,220)     (5,683)    (15,915)   (31,027)     (24,734)

Gain on sale of laboratory and manufacturing facilities ...       --       3,298          --         --           --
Gain on sale of Targon subsidiary .........................       --          --       2,833         --           --

Other income (expense) ....................................      611         412         (70)        315         968
                                                            --------    --------    --------    --------    --------

      Loss before income taxes and cumulative effect of
         accounting change ................................  (24,609)     (1,973)    (13,152)    (30,712)    (23,766)
Income tax benefit ........................................   (1,625)     (2,702)         --          --          --
                                                            --------    --------    --------    --------    --------

      Income (loss) before cumulative effect of
         accounting change ................................  (22,984)        729     (13,152)    (30,712)    (23,766)
Cumulative effect of accounting change (3) ................   (4,314)         --          --          --          --
                                                            --------    --------    --------    --------    --------

Net income (loss) .........................................  (27,298)        729     (13,152)    (30,712)    (23,766)
Dividends, including deemed
   dividends on preferred stock ...........................       --          --        (119)     (1,352)     (4,571)
                                                            --------    --------    --------    --------    --------
Net income (loss) to common stockholders .................. $(27,298)   $    729    $(13,271)   $(32,064)   $(28,337)
                                                            ========    ========    ========    ========    ========

Net income (loss) per common share:
      Basic and diluted net income (loss) before
        cumulative effect of  accounting change ........... $  (0.31)   $   0.01    $  (0.24)   $  (0.63)   $  (0.59)
      Cumulative effect of accounting change (3) ..........    (0.06)         --          --          --          --
                                                            --------    --------    --------    --------    --------

      Basic and diluted net income (loss) ...............   $ (0.37)    $   0.01    $  (0.24)   $  (0.63)   $  (0.59)
                                                            ========    ========    ========    ========    ========

Weighted average common shares outstanding:
      Basic ...............................................   73,337      67,179      56,419      51,134      48,401
                                                            ========    ========    ========    ========    ========

      Diluted .............................................   73,337      68,187      56,419      51,134      48,401
                                                            ========    ========    ========    ========    ========

Pro forma amounts assuming accounting
  change is applied retroactively:
    Net loss to common stockholders .....................   $(22,984)   $   (484)   $(16,373)   $(32,064)   $(28,337)
                                                            ========    ========    ========    ========    ========
    Basic and diluted net loss per common share..........   $  (0.31)   $  (0.01)   $  (0.29)   $  (0.63)   $  (0.59)
                                                            ========    ========    ========    ========    ========
</TABLE>
                                                                    -37-
<PAGE>
<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                                  ----------------
Consolidated Balance Sheet Data:                           2000         1999           1998          1997         1996
                                                       ------------------------------------------------------------------
                                                                                  (in thousands)
<S>                                                    <C>           <C>           <C>           <C>           <C>
Cash, short-term investments and restricted cash...    $  11,993     $  12,394     $   3,015     $   7,401     $  24,765
Total assets.......................................       20,416        18,605        10,900        27,555        41,543
Long-term debt.....................................        2,374         2,416         2,223        10,171         1,855
Accumulated deficit................................     (328,581)      (301,283)    (302,012)     (288,741)     (256,677)
Stockholders' equity...............................        7,218        10,549           443         9,983        32,927
</TABLE>


(1)      Prior to 1997,  product sales were minimal and no revenues were derived
         from  contract  manufacturing,  therefore,  cost of  product  sales was
         immaterial and was included in research and development expenses.
(2)      In August 2000,  the Company  licensed  product  rights from Advanced
         Magnetics,  Inc. In June 1999,  the Company acquired Prostagen, Inc.
(3)      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.

                                                                    -38-
<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.  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.  Stockholders 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 of  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 profitability of its products;
(ix) the ability to attract,  and the ultimate success of, strategic  partnering
arrangements, collaborations, and acquisition candidates; (x) 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;  (xi) the  success of the Company in
obtaining marketing  approvals for its products in Canada and Europe;  (xii) 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 (xiii) 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 2000

During 2000,  the Company  terminated  the  co-marketing  arrangement  with Bard
Urological  Division  of the C.R.  Bard  Company,  Inc.  ("Bard") to assume sole
responsibility for the marketing and sales of the Company's ProstaScint product.
The Company has expanded its sales force and believes that a highly  trained and
dedicated  internal  sales  force  will be able to most  effectively  market the
Company's  product  and build  capability  for  future  products.  The  Company,
however, has limited experience in direct selling and can not give any assurance
as to the impact on sales by assuming selling efforts itself.

In August 2000, the Company broadened its oncology presence and strengthened its
position  in the area of cancer  staging and  detection  and therapy by entering
into  marketing,  license and supply  agreements with Advanced  Magnetics,  Inc.
("AVM").  Under the terms of the AVM agreements,  the Company acquired exclusive
U.S. marketing 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 from the FDA, subject to
certain  conditions,  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 in 2001. There can be no assurance that the
Company will receive FDA approval to market  Combidex or Code 7228 in the United
States.

In addition,  the Company in-licensed  BrachySeed,  an FDA approved  radioactive
implant for prostate cancer  therapy,  from Draximage Inc. in December 2000. The
Company  plans to utilize its  oncology  sales  force to market the  radioactive
iodine  BrachySeed  product which was launched in January 2001.  There can be no
assurance  however,  as to the market  acceptance of the product or whether this
product will significantly increase the revenues of the Company.

                                      -39-
<PAGE>
Recently,  the Company's  subsidiary AxCell  BioSciences  ("AxCell")  achieved a
significant  milestone by successfully mapping all the interactions of the known
proteins found in the WW protein  domain  family,  one of the estimated 60 to 80
protein domain families in the human body. AxCell expects to launch its ProChart
database  product  with its  marketing  partner,  InforMax  Inc.,  in the second
quarter of 2001. There can be no assurance, however, as to the market acceptance
of the product or whether this product will significantly  increase the revenues
of the Company.

RESULTS OF OPERATIONS

Years ended December 31, 2000, 1999 and 1998

Revenues

Total  revenues  were  $10.5  million in 2000,  $11.2  million in 1999 and $19.9
million in 1998.  The decrease in 2000 and 1999 from 1998 was  primarily  due to
lower  product  related  revenues,  the phasing  out of  contract  manufacturing
services  during 1999 and lower license and research  revenues.  Product related
revenues,  including product sales and royalty revenues,  accounted for 90%, 72%
and 54% of revenues in 2000, 1999 and 1998,  respectively.  License and contract
revenues accounted for the remainder of revenues.

Product  related  revenues were $9.4 million,  $8.0 million and $10.6 million in
2000, 1999 and 1998, respectively. ProstaScint accounted for 73%, 79% and 60% of
the  product  related  revenues  in 2000,  1999 and  1998,  respectively,  while
Quadramet  royalties and sales accounted for 21%, 13% and 31% of product related
revenues in 2000, 1999 and 1998, respectively.  Sales from ProstaScint were $6.9
million,  $6.4  million and $6.4 million in 2000,  1999 and 1998,  respectively.
Beginning in July 2000, the Company assumed sole  responsibility for selling and
marketing  ProstaScint from Bard, its former co-marketing  partner.  The Company
took this step because it believes that a highly trained and dedicated  internal
sales force will be able to market its products  most  effectively.  The Company
cannot be certain, however, as to the effect on sales of ProstaScint as a result
of this  action.  The  Company  plans to utilize  Cytogen's  oncology  sales and
marketing organization for the launch of BrachySeed and later Combidex,  subject
to the receipt of final marketing approval of Combidex by FDA.

Royalties  and sales from  Quadramet  were $2.0  million,  $1.1 million and $3.3
million in 2000, 1999 and 1998, respectively. From the time of product launch in
1997 through June 1998, Cytogen recorded royalty revenues for Quadramet based on
minimum contractual payments,  which were in excess of actual sales.  Subsequent
to June 1998,  the minimum  royalty  arrangement  was  discontinued  and Cytogen
recorded  product  revenues from Quadramet  based on actual sales.  Beginning in
1999,  Quadramet  royalties  are  based on net  sales  of  Quadramet  by  Berlex
Laboratories Inc. ("Berlex"),  Cytogen's marketing partner for Quadramet. Berlex
relaunched the product in March 1999.  Although  Cytogen believes that Berlex is
an  advantageous  marketing  partner,  there can be no assurance  that Quadramet
will,  following the re-launch of the product,  achieve  market  acceptance on a
timely basis or result in significant revenues for Cytogen.

Other product  revenues  include sales from OncoScint CR/OV which were $512,000,
$620,000 and $872,000 in 2000,  1999 and 1998,  respectively.  The Company sells
OncoScint CR/OV for diagnostic use in ovarian and colorectal  cancer. The market
for  OncoScint  CR/OV  for  colorectal  cancer  diagnostic  has been  negatively
affected by positron emission tomography or "PET" scans which has been shown the
same or higher sensitivity than OncoScint CR/OV. In 1998, other product revenues
included  $51,000 from  autologous  lymphocyte  therapy  ("ALT")  treatments for
metastatic  renal cell carcinoma.  Due to the  discontinuance  of the program in
September 1998, the Company received no additional revenues from ALT treatments.

During 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 2000, the Company recognized $859,000 of license revenue
that was included in the cumulative effect adjustment as of January 1, 2000. The
Company's  1999  and  1998  results  have not  been  restated  to apply  SAB 101
retroactively.
                                      -40-
<PAGE>
License  revenues for 2000,  1999 and 1998 were $859,000,  $2.0 million and $7.2
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. In 1998, the Company recorded a $7.1 million
up-front  licensing  payment  from Berlex for the  marketing  and  manufacturing
rights of  Quadramet.  Had the  Company  been  subject to SAB 101 prior to 2000,
license  revenue  would  have  been  $834,000  and  $143,000  in 1999 and  1998,
respectively.

Revenues from contract  manufacturing and research revenues were $165,000,  $1.2
million and $2.0 million in 2000,  1999 and 1998,  respectively.  Revenues  from
contract  manufacturing  were  $604,000  and  $1.7  million  in 1999  and  1998,
respectively.  The Company  phased out contract  manufacturing  services  during
1999.

Operating Expenses

Total operating expenses were $35.7 million,  $16.9 million and $35.8 million in
2000, 1999 and 1998, respectively.  The 2000 increase from 1999 is due primarily
to the acquisition of marketing and technology  rights to Combidex and Code 7228
from AVM,  increased  development  efforts related to the proteomics  program at
AxCell and PSMA  technologies,  and the expansion of in-house  sales force.  The
1999 decrease from 1998 was the result of savings from the implementation of the
Company's  restructuring  plan.  The plan,  implemented in 1998 and completed in
1999,  included the sale of the  manufacturing  facility which eliminated excess
capacity and reduced the cost of manufacturing the Company's  products,  closure
of Cellcor,  a subsidiary,  corporate  downsizing,  the  termination  of product
development efforts through Targon, a subsidiary, and termination and curtailing
of certain basic research and clinical programs. The 2000 operating expenditures
included $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").   The  1998   operating   expenses   included   $1.4  million  of
restructuring  costs  associated  with the  closure  of  Cellcor  and  corporate
downsizing,  $539,000 in costs  related to the  implementation  of the Company's
turn-around  plan,  $4.0 million for a Quadramet  manufacturing  commitment  and
$995,000 for manufacturing and distribution of Quadramet.

Costs of product and contract  manufacturing  revenues were $4.4  million,  $4.1
million  and  $12.3  million  in 2000,  1999 and  1998,  respectively.  The 2000
increase from 1999 was due to increased  product  manufacturing  costs. The 1999
decrease  from 1998 was due to decreased  manufacturing  costs  associated  with
decreased  contract  manufacturing  activities  in 1999 and lower  manufacturing
costs  for  Cytogen  products  as a  result  of the  sale  of the  manufacturing
facility.  The 1999  decrease  compared  to 1998 is also  due to the 1998  costs
associated with a one-time charge of $4.0 million for a Quadramet  manufacturing
commitment and $995,000 for the manufacturing and distribution of Quadramet (see
Note 9 to the Consolidated Financial Statements).

Research and  development  expenses  were $7.0 million in 2000,  $3.8 million in
1999 and $10.0  million in 1998.  These  expenses  principally  reflect  product
development  efforts and support for various ongoing clinical  trials.  The 2000
increase from 1999 was due to increased  funding for the  proteomics  program at
AxCell,  the product  development  efforts related to the PSMA  technologies and
costs associated with certain manufacturing development by DSM Biologics Company
B.V.  ("DSM")  with  respect  to  ProstaScint  (see  Note 2 to the  Consolidated
Financial  Statements).  The Company  anticipates  that  funding for AxCell will
continue to increase.  The 1999 decrease  from 1998 is due to the  curtailing of
certain of the Company's  product  development  efforts including the closure of
Cellcor,  the  termination  of basic  research  programs  and the scale  back of
various clinical programs.

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).

Equity losses in Targon  subsidiary  was $1.0 million in 1998.  The Company sold
Targon in 1998.

Selling and marketing expenses were $6.1 million,  $4.2 million and $5.1 million
in 2000,  1999 and 1998,  respectively.  The 2000 increase from 1999 and 1998 is
due to the  expansion  of the  Company's  in-house  sales  force and  pre-launch
marketing costs  associated with the January 2001 launch of BrachySeed  prostate
cancer  product.  Cytogen  assumed  sole  responsibility  for  the  selling  and
marketing of  ProstaScint  in July 2000.  The 1999 and 1998  marketing  expenses
reflect  efforts to establish  and maintain the Partners in  Excellence  ("PIE")
program.

                                      -41-
<PAGE>

General and  administrative  expenses were $4.9  million,  $3.5 million and $7.4
million in 2000, 1999 and 1998, respectively. The 2000 increase from 1999 is due
to expenses  related to the  termination of the proposed  merger with AVM, stock
based  compensation for a key employee,  additional  staffing and related costs.
The 1999  decrease  from 1998 is due to various cost  containing  efforts in the
Company's restructuring plan implemented in 1999 and 1998 such as the closure of
Cellcor and corporate downsizing. The 1999 decrease from 1998 is also due to the
1998 restructuring  costs of $1.9 million including severance and implementation
of a turn-around plan.

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.

Gain on sale of Targon  subsidiary  was $2.8  million in 1998 as a result of the
sale of Cytogen's ownership interest in Targon to Elan Corporation, plc ("Elan")
(see Note 7 to the Consolidated Financial Statements).

Interest Income/Expense
Interest  income was  $774,000,  $441,000 and $582,000 for 2000,  1999 and 1998,
respectively. The 2000 increase from 1999 is due to higher average cash balances
during 2000.  The 1999 decrease  from 1998 is due  primarily to interest  income
realized  from the $10.0 million note from Targon  payable to Cytogen.  The note
was  canceled as a result of the sale of Targon to Elan in August 1998 (see Note
7 to the Consolidated Financial Statements).

Interest  expense was  $163,000,  $29,000 and  $652,000 in 2000,  1999 and 1998,
respectively.  The 2000  increase  from  1999 is due to  interest  related  to a
convertible  promissory note with Elan (see Note 7 to the Consolidated Financial
Statements) and finance charges related to various  equipment  leases.  The 1999
decrease from 1998 was due to the  cancellation  and satisfaction of liabilities
associated  with Elan and Knoll  Pharmaceuticals  Company  ("Knoll").  The $10.0
million note due to Elan was cancelled as a result of the sale of Targon to Elan
in August  1998.  The  Company  paid the balance of the  obligation  to Knoll in
December 1998.

Income tax benefit
During  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 $1.6 million and $2.7 million tax benefit, respectively.  Under
the current  legislation,  the Company may be able to sell a minimum $977,000 of
the remaining  approved $3.7 million of tax benefits in 2001.  The actual amount
of tax  credits the  Company  may sell will  depend  upon the  allocation  among
qualifying companies of an annual pool established by the State of New Jersey.

Net Income/Loss
Net loss to Common  Stockholders  was $27.3  million in 2000  compared  to a net
income of $729,000 in 1999 and a net loss of $13.3 million in 1998. Net loss per
common  share  in 2000  was  $0.37  based  on  weighted  average  common  shares
outstanding  of 73.3  million.  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. The net loss per common share in 1998 is
$0.24 based on 56.4 million average common shares outstanding.


LIQUIDITY AND CAPITAL RESOURCES

The Company's  cash,  cash  equivalents  and short-term  investments  were $12.0
million as of December  31, 2000,  compared to $12.4  million as of December 31,
1999. The cash used for operating  activities in 2000 was $9.0 million  compared
to $3.9  million  in the same  period  of 1999.  The  increase  in cash used for
operating  activities in 2000 was  primarily due to continued  investment in the
proteomics business at AxCell Biosciences, pre-launch marketing costs associated
with the January 2001 launch of BrachySeed  prostate cancer  product,  increased
marketing  and sales  efforts for the  Company's  existing  products and various
expenses related to the termination of the proposed merger with AVM.

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 February 2000, the Company received $1.0 million from
Berlex  Laboratories for the exercise of a warrant to purchase  1,000,000 shares
of  Cytogen's  Common  Stock at $1.00 per share.  In  addition,  during 2000 the
Company sold 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.

                                      -42-
<PAGE>
In September  2000,  the Company  sold to 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, over the next 20 months, Cytogen may, at its discretion,
sell  additional  shares  of its  Common  Stock to Acqua  Wellington  at a small
discount to the market  price to be  determined  before each sale  provided  the
Threshold Price, as defined  therein,  for the Company's stock is at least $4.00
per  share.  The  financing  facility  is not  subject to any  minimum  takedown
requirements,  nor did the Company pay any financing fees or other  compensation
in connection  with this  transaction.  Pursuant to this  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.

In January  2001,  the Company  received  cash of $1.6  million  relating to the
December  2000 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  $977,000 of the remaining  approved $3.7 million of tax benefits
in 2001.  The actual amount of tax credits the Company may sell will depend upon
the allocation among  qualifying  companies of an annual pool established by the
State of New Jersey

In connection  with the licensing of PSMA  technology to a joint venture between
Cytogen and  Progenics,  the Company will receive  $500,000 on December 31, 2001
(see Note 6 to the Consolidated Financial Statements).

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 may expend funds for
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, the Company 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.  To fund these strategic and operating
activities, the Company may sell equity and 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  together with the Acqua Wellington  equity line should be adequate to
fund the Company's  operations for the foreseeable future. The Company cannot be
certain that it will not consume a significant amount of its currently available
resources and reasonably  expects that it will have additional  requirements for
debt  or  equity   capital,   irrespective   of  whether  and  when  it  reaches
profitability,  for further  development  of  products,  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.  Based on the
Company's historical ability to raise capital and current market conditions, the
Company  believes other financing  alternatives  are available.  There can be no
assurance  that the financing  commitments  described  above or other  financial
alternatives 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

                                      -43-
<PAGE>

others  that may  require  the  Company 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.

Recently Enacted Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended by SFAS No. 137,  "Accounting  for  Derivative  Instruments  and Hedging
Activities  - Deferral  of the  Effective  Date of FASB  Statement  No. 133 - an
amendment  of FASB  Statement  No.  133",  which was adopted by us on January 1,
2001,  provides a comprehensive and consistent  standard for the recognition and
measurement of derivatives and hedging  activities.  As we do not currently hold
derivative  instruments  or engage in hedging  activities,  the adoption of this
pronouncement  is not expected to have any impact on our  financial  position or
results of operations for the year 2001.


                                      -44-
<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.




                                      -45-
<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  2001  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 2001  Annual  Meeting of  Stockholders  is
incorporated herein by reference to such proxy statement.

Item 12.   Security Ownership of Certain Beneficial Owners and Management.

The  discussion  under the heading  "Security  Ownership  of Certain  Beneficial
Owners and Management" in the Company's  definitive proxy statement for the 2001
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 2001 Annual
Meeting  of  Stockholders  is  incorporated  herein by  reference  to such proxy
statement.




                                      -46-
<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    -  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.


3.2    -  By-Laws of Cytogen Corporation,  as amended.  Filed as an exhibit to
          Form 10-Q  Quarterly  Report for the  quarter  ended June 30, 1999 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
          Preferred  Stock  as  Exhibit  A, the form of  Rights  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.

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.+

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.*


                                      -47-
<PAGE>

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.*

10.11.1-  Cytogen  Corporation  1995 Stock Option Plan. Filed as an exhibit
          to Form 10-K Annual  Report for the year ended  December  31, 1995 and
          incorporated herein by reference.

10.11.2-  Amendment No. 1 to the Cytogen Corporation 1995 Stock Option Plan
          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.+

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.  Filed as an
          exhibit  to  Form  S-8  Registration  Statement  (No.  333-27673)  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 10Q  Quarterly
          Report for the quarter ended June 30, 1997 and incorporated  herein by
          reference.*

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.+

                                      -48-
<PAGE>

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 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  -  The 1999 Cytogen  Corporation  Non-Employee  Directors  Stock Option
          Plan.  Filed as an  exhibit  to Form  10-Q  Quarterly  Report  for the
          quarter ended June 30, 1999 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 by reference  herein.*

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  by  reference
          herein.*

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.

                                      -49-
<PAGE>



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. Filed herewith.**


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. Filed herewith.**

21     -  Subsidiaries of Cytogen Corporation. Filed herewith.

23     -  Consent  of Arthur  Andersen  LLP.  Filed  herewith.

+ Management contract or compensatory plan or arrangement.

* Cytogen Corporation has 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.

**Cytogen Corporation has requested confidential treatment of certain provisions
contained in this exhibit.  The copy filed as an exhibit  omits the  information
subject to the confidential request.

     (b)  Reports on Form 8-K:

     The Company filed two Reports on Form 8-K during the quarter ended December
31, 2000. On October 5, 2000, the Company filed a Report on Form 8-K relating to
the issuance and sale of 902,601  shares of the Company's  Common Stock to Acqua
Wellington  North  American  Equities Fund,  Ltd.  ("Acqua  Wellington")  for an
aggregate purchase price of $6.0 million.

     On October 12, 2000, the Company filed a Report on Form 8-K relating to the
execution by the Company and Acqua  Wellington of an equity  financing  facility
whereby the Company may, at its sole  discretion and from time to time over a 20
month period  beginning in October  2000,  sell up to $70 million in  registered
shares of the Company's  Common Stock to Acqua Wellington at a small discount to
market price, as determined prior to each such sale.

     (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.


                                      -50-
<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 30th day of March
2001.

                     Cytogen Corporation

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


                                      -51-

<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 30, 2001
-------------------------------     (Principal Executive Officer), and Director
H. Joseph Reiser

/s/ Lawrence R. Hoffman             Vice President & Chief Financial Officer        March 30, 2001
-------------------------------     (Principal Financial and Accounting Officer)
Lawrence R. Hoffman

/s/ John E. Bagalay, Jr.            Director                                        March 30, 2001
-------------------------------
John E. Bagalay, Jr.

/s/ Stephen K. Carter               Director                                        March 30, 2001
-------------------------------
Stephen K. Carter

/s/ James A. Grigsby                Director and Chairman of the Board              March 22, 2001
-------------------------------
James A. Grigsby

/s/ Robert F. Hendrickson           Director                                        March 30, 2001
-------------------------------
Robert F. Hendrickson

/s/ Kevin G. Lokay                  Director                                        March 30, 2001
-------------------------------
Kevin G. Lokay

/s/ S. Leslie Misrock               Director                                        March 30, 2001
-------------------------------
S. Leslie Misrock
</TABLE>


                                                 -52-
<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.........................................................    54

Consolidated Balance Sheets as of December 31, 2000 and 1999.....................................    55

Consolidated Statements of Operations--Years Ended December 31, 2000, 1999 and 1998..............    56

Consolidated Statements of Stockholders' Equity--Years Ended December 31, 2000, 1999 and 1998....    57

Consolidated Statements of Cash Flows--Years Ended December 31, 2000, 1999 and 1998..............    58

Notes to Consolidated Financial Statements.......................................................    59
</TABLE>


                                             -53-
<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, 2000
and 1999, and the related consolidated  statements of operations,  stockholders'
equity and cash flows for each of the three years in the period  ended  December
31, 2000.  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  financial  position  of Cytogen  Corporation  and
Subsidiaries  as of  December  31,  2000  and  1999  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000 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 1, 2001


                                      -54-
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                     December 31,
                                                                            --------------------------
                                                                                2000            1999
                                                                            ----------       ---------
<S>                                                                         <C>              <C>
ASSETS:
Current Assets:
   Cash and cash equivalents ........................................       $  11,993        $  10,801
   Short-term investments ...........................................              --            1,593
   Receivable on income tax benefit sold ............................           1,625               --
   Accounts receivable, net .........................................           1,841            2,150
   Inventories ......................................................             883              685
   Other current assets .............................................             377              465
                                                                            ---------        ---------

      Total current assets ..........................................          16,719           15,694

Property and Equipment, net .........................................           2,193            1,997

Other Assets ........................................................           1,504              914
                                                                            ---------        ---------

                                                                            $  20,416        $  18,605
                                                                            =========        =========


LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
   Current portion of long-term debt ................................       $     151        $     162
   Accounts payable and accrued liabilities .........................           7,218            5,478
   Deferred revenue .................................................             859               --
                                                                            ---------        ---------

      Total current liabilities .....................................           8,228            5,640
                                                                            ---------        ---------

Long-Term Debt ......................................................           2,374            2,416
                                                                            ---------        ---------
Deferred Revenue ....................................................           2,596               --
                                                                            ---------        ---------

Commitments and Contingencies (Note 20)

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,
       75,594,000 and 70,527,000 shares issued and outstanding
       at December 31, 2000 and 1999, respectively ..................             756              705
   Additional paid-in capital .......................................         335,938          311,209
   Deferred compensation ............................................            (895)             (82)
   Accumulated deficit ..............................................        (328,581)        (301,283)
                                                                            ---------        ---------

      Total stockholders' equity ....................................           7,218           10,549
                                                                            ---------        ---------

                                                                            $  20,416        $  18,605
                                                                            =========        =========
</TABLE>
                The accompanying notes are an integral part of these statements.

                                      -55-
<PAGE>
                                     CYTOGEN CORPORATION AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                               (All amounts in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                     -------------------------------------
                                                                        2000          1999          1998
                                                                     ---------     ---------     ---------
<S>                                                                  <C>           <C>           <C>
Revenues:
 Product related:
    ProstaScint ................................................     $  6,912      $  6,351      $  6,378
    Quadramet ..................................................           --            --         1,675
    Others .....................................................          512           620           923
                                                                     --------      --------      --------
       Total product sales .....................................        7,424         6,971         8,976

    Quadramet royalties ........................................        2,004         1,060         1,664
                                                                     --------      --------      --------
       Total product related ...................................        9,428         8,031        10,640

 License and contract ..........................................        1,024         3,171         9,239
                                                                     --------      --------      --------
       Total revenues ..........................................       10,452        11,202        19,879
                                                                     --------      --------      --------

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

       Total operating expenses ................................       35,672        16,885        35,794
                                                                     --------      --------      --------

       Operating loss ..........................................      (25,220)       (5,683)      (15,915)

Gain on sale of laboratory and manufacturing facilities ........           --         3,298            --
Gain on sale of Targon subsidiary ..............................           --            --         2,833
Interest income ................................................          774           441           582
Interest expense ...............................................         (163)          (29)         (652)
                                                                     --------      --------      --------

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

           Income (loss) before cumulative effect of
            accounting change ..................................      (22,984)          729       (13,152)
Cumulative effect of accounting change (Note 1) ................       (4,314)           --            --
                                                                     --------      --------      --------

Net income (loss) ..............................................      (27,298)          729       (13,152)
Dividends on preferred stock ...................................           --            --          (119)
                                                                     --------      --------      --------
Net income (loss) to common stockholders .......................     $(27,298)     $    729      $(13,271)
                                                                     ========      ========      ========

Net income (loss) per common share:
           Basic and diluted net income (loss) before cumulative
            effect of accounting change ........................     $  (0.31)     $   0.01      $  (0.24)
           Cumulative effect of accounting change ..............        (0.06)           --            --
                                                                     --------      --------      --------
           Basic and diluted net income (loss) .................     $  (0.37)     $   0.01      $  (0.24)
                                                                     ========      ========      ========
Weighted average common shares outstanding:
           Basic ...............................................       73,337        67,179        56,419
                                                                     ========      ========      ========
           Diluted .............................................       73,337        68,187        56,419
                                                                     ========      ========      ========
</TABLE>
               The accompanying notes are an integral part of these statements.

                                                    -56-
<PAGE>
                                       CYTOGEN CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                  (All amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                 Additional     Deferred        Accu-           Total
                                                     Common       Paid-in        Compen-       mulated      Stockholders'
                                                     Stock        Capital        sation        Deficit         Equity
                                                  -----------   -----------   -----------    -----------    -------------

<S>                                               <C>           <C>           <C>             <C>            <C>
Balance, December 31, 1997 ..................     $     512     $ 298,212     $      --       $(288,741)     $   9,983

Sale of 3,403,011 shares of common
 stock ......................................            34         2,583            --              --          2,617
Dividends on series B preferred stock .......            --            --            --            (119)          (119)
Issuance of 7,377,054 shares of common
 stock upon conversion of series B preferred
 stock and accumulated dividends ............            73            55            --              --            128
Sale of warrants to purchase 1,000,000
 shares of common stock .....................            --           855            --              --            855
Modification of existing warrants to purchase
 260,000 shares of common stock .............            --           131            --              --            131
Net loss ....................................            --            --            --         (13,152)       (13,152)
                                                  ---------     ---------     ---------       ---------      ---------

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
                                                  =========     =========      =========      =========      =========
</TABLE>

                The accompanying notes are an integral part of these statements.


                                                    -57-

<PAGE>


                          CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (All amounts in thousands)
<TABLE>
<CAPTION>


                                                                               Year Ended December 31,
                                                                      -------------------------------------
                                                                         2000          1999          1998
<S>                                                                   <C>           <C>           <C>
Cash Flows From Operating Activities:
Net income (loss) ...............................................     $(27,298)     $    729      $(13,152)
                                                                      --------      --------      --------
Adjustments to reconcile net income (loss) to net cash used in
 operating activities:
   Acquisition of marketing and technology rights ...............       13,079         1,214            --
   Cumulative effect of accounting change .......................        4,314            --            --
   Depreciation and amortization ................................        1,027         1,051         1,196
   Imputed interest .............................................           29            87            81
   Warrant, stock and stock option grants .......................          261           221           163
   Stock based compensation .....................................          249             2            --
   Amortization of deferred revenue .............................         (859)           --            --
   Write down of property and equipment .........................           --            79           657
   Gain on sale of laboratory and manufacturing facilities ......           --        (3,298)           --
   Gain on sale of other property and equipment .................         (148)          (54)           --
   Gain on sale of Targon subsidiary ............................           --            --        (2,833)
   Equity loss in Targon subsidiary .............................           --            --         1,020
   Changes in assets and liabilities:
      Accounts receivable, net ..................................          397          (715)        2,702
      Inventories ...............................................         (198)         (435)          193
      Other assets ..............................................       (1,631)          (97)            4
      Accounts payable and accrued liabilities ..................        1,740        (2,661)        1,944
                                                                      --------      --------      --------

              Total adjustments .................................       18,260        (4,606)        5,127
                                                                      --------      --------      --------

      Net cash used in operating activities .....................       (9,038)       (3,877)       (8,025)
                                                                      --------      --------      --------

Cash Flows From Investing Activities:
Net cash acquired from Prostagen, Inc. (see Note 5) .............           --           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)           --
Purchases of property and equipment .............................       (1,209)         (523)         (100)
Purchase of product right (see Note 4) ..........................         (500)           --            --
Proceeds from sale of Targon subsidiary .........................           --            --         2,000
                                                                      --------      --------      --------

      Net cash provided by investing activities .................           32         2,732         1,900
                                                                      --------      --------      --------

Cash Flows From Financing Activities:
Proceeds from issuance of common stock ..........................       10,378         9,809            51
Proceeds from issuance of notes payable .........................           --            --         2,750
Proceeds from issuance of warrants ..............................           --            --           855
Payments of long-term liabilities ...............................         (180)         (878)       (1,898)
Dividends on series B preferred stock ...........................           --            --           (19)
                                                                      --------      --------     ---------

      Net cash provided by financing activities .................       10,198         8,931         1,739
                                                                      --------      --------      --------

Net increase (decrease) in cash and cash equivalents ............        1,192         7,786        (4,386)
Cash and cash equivalents, beginning of year ....................       10,801         3,015         7,401
                                                                      --------      --------      --------

Cash and cash equivalents, end of year ..........................     $ 11,993      $ 10,801      $  3,015
                                                                      ========      ========      ========

</TABLE>

                The accompanying notes are an integral part of these statements.

                                                  -58-
<PAGE>

                      CYTOGEN CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Cytogen  Corporation  ("Cytogen" or "the Company" which includes the Company and
its  subsidiaries)  is a  biopharmaceutical  company with two principal lines of
business,  proteomics  and  oncology.  The Company is extending its expertise in
antibodies and molecular  recognition  to the  development of new products and a
proteomics-driven  drug  discovery  platform.  The  Company  has  established  a
pipeline of product candidates based upon its proprietary  antibody and prostate
specific membrane antigen, or PSMA, technologies. Through its subsidiary, AxCell
Biosciences  Corporation,  the Company is also developing a proprietary  protein
pathway  database  called  ProChart  as a  discovery  and  development  tool for
subscribers in the pharmaceutical, biotechnology and agricultural industries.

Cytogen's  cancer  management   business   currently   comprises  four  marketed
FDA-approved  products:  ProstaScint,  used to image the  extent  and  spread of
prostate  cancer;  Quadramet,  marketed  for the relief of cancer-  related bone
pain, OncoScint CR/OV, marketed as a diagnostic imaging agent for colorectal and
ovarian  cancer,  and  BrachySeed,  implants for prostate  cancer  therapy.  The
Company also  in-licensed  two product  candidates,  Combidex and Code 7228, two
magnetic  resonance  imaging  agents for oncology  applications.  The Company is
extending its cancer  pipeline by  developing  PSMA,  which Cytogen  exclusively
licensed from Memorial  Sloan-Kettering  Cancer Center. PSMA is a unique antigen
highly expressed in prostate cancer cells and in the neovasculature of a variety
of other  solid  tumors,  including  breast,  lung and  colon.  The  Company  is
developing its PSMA  technology as part of its approach to offering a full range
of prostate cancer management  products and services  throughout the progression
of the disease, including gene-based immunotherapy vaccines,  antibody-delivered
therapeutic compounds and novel assays for detection of primary prostate cancer.
Cytogen also plans to apply its PSMA technology,  including  therapeutics and in
vitro  diagnostics,  toward  other  types of  cancer  based  upon the  Company's
experience  in  prostate  cancer.   The  Company's  in  vivo   immunotherapeutic
development   program  is  being  conducted  in  collaboration   with  Progenics
Pharmaceuticals, Inc.

Basis of Consolidation

The consolidated  financial  statements  include the accounts of Cytogen and its
subsidiaries,  AxCell  Biosciences  Corporation  ("AxCell"),  and Prostagen Inc.
("Prostagen").  Intercompany  balances and transactions  have been eliminated in
consolidation.   During  1998,  the  financial   statements  also  included  the
investment results of Targon Corporation ("Targon"), which were accounted for on
the equity method (see Investment in Targon Subsidiary). The Company sold Targon
in the third quarter of 1998.

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 $99,000,  $44,000 and $500,000 in
2000, 1999 and 1998,  respectively.  During 2000 and 1999, the Company purchased
$49,000 and $223,000, respectively, of equipment under various capital leases.

Short-Term Investments

At December  1999,  the  Company's  short-term  investments  are  classified  as
available for sale and are carried at fair value based on quoted market prices.

                                      -59-

<PAGE>


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


Receivables

At December 31, 2000 and 1999,  accounts receivable were net of an allowance for
doubtful accounts of $35,000 and $83,000,  respectively.  The Company charged to
expense  $10,000 as a provision  for doubtful  accounts in 1999. At December 31,
2000,  approximately  $457,000 of the Company's accounts  receivable balance was
due from Progenics  Pharmaceuticals,  Inc.  ("Progenics") to be paid by December
31, 2001, as compared to $870,000 at December 31, 1999 (see Note 6).

At December 31, 2000, the Company had a $1.6 million  receivable due from Public
Service  Electric  and  Gas  Company  relating  to a sale  of New  Jersey  state
operating loss carryforwards and research and development  credits.  The Company
received the proceeds from the sale in January 2001.

Inventory

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

<TABLE>
<CAPTION>

                                                                          December 31,
                                                                          ------------
                                                                     2000            1999
                                                                   --------        --------
        <S>                                                        <C>             <C>
        Raw materials...........................................   $718,000        $529,000
        Work-in process.........................................     59,000          28,000
        Finished goods..........................................    106,000         128,000
                                                                   --------        --------
                                                                   $883,000        $685,000
                                                                   ========        ========
</TABLE>

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:

<TABLE>
<CAPTION>

                                                                        December 31,
                                                                        ------------
                                                                    2000            1999
                                                                 ----------      ----------
        <S>                                                      <C>             <C>
        Leasehold improvements.................................. $3,211,000      $3,196,000
        Equipment and furniture.................................  5,668,000       4,764,000
                                                                 ----------      ----------
                                                                  8,879,000       7,960,000
        Less - accumulated depreciation and amortization........ (6,686,000)     (5,963,000)
                                                                 ----------      ----------
                                                                 $2,193,000      $1,997,000
                                                                 ==========      ==========
</TABLE>

In January 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.  Cytogen also signed a three-year  agreement under which two of Cytogen's
products,  ProstaScint and OncoScint CR/OV,  will continue to be manufactured at
its former facility.  As a result of the sale, the Company  recognized a gain of
approximately $3.3 million during the first quarter of 1999.


                                      -60-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Investment in Targon Subsidiary

In March 1998,  Cytogen's  ownership interest in Targon decreased from 99.75% to
49.875%  (see  Note 7).  As a  result,  the  Company  began  accounting  for its
investment  in Targon  using the equity  method.  Under the equity  method,  the
Company  recognized  100% of  Targon's  losses  through  March  31,  1998 in its
consolidated statement of operations as "Equity Loss in Targon Subsidiary," with
a corresponding reduction in the carrying amount of its investment.  The Company
did not recognize  Targon's  losses after March 31, 1998 based on the completion
of the sale of Targon in August 1998.

In August 1998 the Company sold its  remaining  ownership  interest in Targon to
Elan Corporation,  plc ("Elan") for $2.0 million (see Note 7). As a result,  the
Company recorded a gain of approximately $2.8 million in 1998.

Other Assets

In October 1999, the Company sold its undeveloped  land in Ewing, New Jersey for
net proceeds of $714,000.  As a result of the sale the Company recognized a gain
of approximately $54,000. During 1998 the Company charged to expense $240,000 to
write down the carrying value of the land to its estimated market value.

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.  Royalties  are  recognized  as  revenue  when  earned.  From the time of
Quadramet's  launch in 1997 to June 1998,  Cytogen  recorded  Quadramet  royalty
revenues  from  DuPont  Pharmaceuticals  Company  ("DuPont")  based  on  minimum
contractual  payments,  which were in excess of actual Quadramet sales. Pursuant
to an agreement  between  Cytogen and DuPont in June 1998,  the minimum  royalty
arrangement  was  discontinued  and Cytogen  reclaimed the  marketing  rights to
Quadramet.  Subsequent  to June 1998,  Cytogen  recorded  product  revenues from
Quadramet based on actual sales. Starting in 1999, Quadramet royalties are based
on  sales  of  Quadramet  by  Berlex  Laboratories  Inc.  ("Berlex"),  Cytogen's
marketing partner for Quadramet (see Note 8).

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
in 2000.

During 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,
which reflects the deferral of an up-front license fee received from Berlex, net
of associated costs, related to the licensing of Quadramet recognized in October
1998 (see Note 8) and a license fee for certain  applications of PSMA to a joint
venture  formed by Cytogen and  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 year ended December 31, 2000,
the Company  recognized  $859,000 in revenue that was 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  show the net loss to
common   stockholders   and  net  loss  per  share   assuming  the  Company  had
retroactively applied SAB 101 to the prior years:



                                      -61-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
                                                                                Year Ended December 31
                                                               ---------------------------------------------------
                                                                    2000               1999               1998
                                                               -------------      -------------      -------------
     <S>                                                       <C>                <C>                <C>
     Net income (loss) to common
      stockholders, as reported.........................       $(27,298,000)      $    729,000       $(13,271,000)
                                                               =============      =============      =============

     Net income (loss) per common share, as reported....       $      (0.37)      $       0.01       $      (0.24)
                                                               =============      =============      =============

     Pro forma net loss to common
      stockholders .....................................       $(22,984,000)      $   (484,000)      $(16,373,000)
                                                               =============      =============      =============
     Pro forma net loss per common stock                       $      (0.31)      $      (0.01)      $      (0.29)
                                                               =============      =============      =============
</TABLE>


Cost of Product and Contract Manufacturing Revenues

In  June  1998,  the  Company  paid  DuPont  $995,000  for   manufacturing   and
distributing Quadramet as a result of Cytogen's reacquiring the marketing rights
of  Quadramet.  In  addition,  the Company  recorded a $4.0  million  charge for
securing a long-term  manufacturing  commitment  for Quadramet  from DuPont (see
Note 9). Beginning in 1999, pursuant to the marketing agreement with Berlex (see
Note 8), there is no manufacturing and distribution  costs related to Quadramet.
In addition,  in 1999 the Company began  phasing out the contract  manufacturing
services to third parties which  resulted in lower costs  associated  with these
services and incurred no further costs in 2000.


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 $45,000,  $194,000
and $228,000 in 2000, 1999 and 1998, 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 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
2000 and 1998 is the same as basic  net  loss per  share,  as the  inclusion  of
common stock equivalents would be antidilutive (see Note 16).

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 on terms and conditions to be
agreed  upon  by  the  parties.  In  2000,  the  Company  recorded  $559,000  of
development expenses related to this agreement.


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


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 accompanying  consolidated  statements 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(TM)  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  royalties on sales and certain  milestone  payments.
Cytogen paid  Draximage  $500,000 upon  execution of the contract which has been
recorded as other assets in the accompanying consolidated balance sheet and will
be amortized over the ten year term of the Draximage agreement.  Pursuant to the
agreement,  Cytogen will pay Draximage  $500,000 and $1.0 million upon the first
sale  of  the  radioisotope   Iodine-125   BrachySeeds  and  the   palladium-103
BrachySeeds, respectively. Other payments are due Draximage upon the achievement
of certain  other  milestones.  The  Company  launched  the  radioactive  iodine
BrachySeed in the U.S. in January 2001.

5.  ACQUISITION OF PROSTAGEN, INC.

On June 15, 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 acquire
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 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 PSMA
development  program. 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

On  June  15,  1999,  Cytogen  entered  into  a  joint  venture  with  Progenics
Pharmaceuticals,  Inc.  ("Progenics")  to  develop  vaccine  and  antibody-based
immunotherapeutic  products utilizing Cytogen's proprietary PSMA technology. The
joint venture will be owned  equally by Cytogen and  Progenics.  Progenics  will
fund up to $3.0 million of development  costs of the program.  After that point,
the Company and  Progenics  will equally  share the future costs of the program.
Cytogen has the exclusive North American  marketing rights on products developed
by the joint venture. In connection with the licensing of the PSMA technology to
the joint  venture,  Cytogen will receive $2.0 million in payments of which $1.5
million was received to date, with the balance to be paid in December

                                      -63-

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


2001.  During the second quarter of 1999,  Cytogen recorded  approximately  $1.8
million in license  fee  revenue  based on the net  present  value of the future
payments  (using a discount rate of 10%). 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 2000. The remaining
$874,000 of deferred revenue will be recognized on a straight-line basis through
June 2002, the estimated term of the development program.

7.  SALE OF TARGON CORPORATION

Targon was established in September 1996 pursuant to agreements  between Cytogen
and Elan,  and was a  majority-owned  (99.75%)  subsidiary of Cytogen.  In March
1998,  Elan  exchanged  its shares of the  Company's  Series A  Convertible  and
Exchangeable  Preferred Stock for 50% of Cytogen's interest in Targon. In August
1998,  Cytogen sold its  remaining  49.875%  interest in Targon to Elan for $2.0
million  (see  Note 1). As a result of the sale,  a warrant  to  purchase  up to
1,000,000  shares of Cytogen  Common  Stock  previously  granted to Elan and all
notes among  Cytogen,  Elan and Targon were  cancelled.  In addition,  in August
1998,  Cytogen  received  $2.0 million  from Elan in exchange for a  convertible
promissory  note (see Note 13). The Company  recognized a gain of  approximately
$2.8 million in 1998 on the Targon transaction.

8.  BERLEX LABORATORIES

In October  1998,  Cytogen  entered  into an  exclusive  license  and  marketing
agreement  ("Berlex  Agreement")  with  Berlex for the  manufacture  and sale of
Quadramet. Under the terms of the Berlex Agreement,  Cytogen received a one-time
license fee of $8.0 million in 1998, of which $4.0 million was paid to DuPont to
secure a long-term  manufacturing  commitment  for  Quadramet.  Berlex also pays
Cytogen royalties on net sales of Quadramet, as well as milestone payments based
on achievement of certain sales levels.  Quadramet was  re-launched by Berlex in
the first quarter of 1999.

In connection  with the Berlex  Agreement,  Cytogen  granted Berlex a warrant to
purchase 1,000,000 shares of Cytogen Common Stock at an exercise price of $1.002
per share. Using the Black-Scholes  option pricing model, the estimated value of
the warrant was  calculated at $855,000,  and was recorded as a reduction of the
one-time license fee revenue recorded in 1998, with a corresponding  increase in
stockholders' equity.

In connection  with the adoption of SAB 101 effective  January 1, 2000 (see Note
1), the Company deferred $2.8 million of the previously  recognized $4.0 million
net fee received from Berlex and recognized $260,000 of this deferred revenue as
license and contract  revenue in 2000.  The  remaining  $2.6 million of deferred
revenue will be recognized on a straight-line  basis through  November 2010, the
product patent life of Quadramet.

9.  THE DUPONT PHARMACEUTICAL COMPANY

Pursuant  to the terms of an  agreement  between  Cytogen  and  DuPont,  Cytogen
received from DuPont  Quadramet  royalty revenues of $1.7 million in 1998, based
on minimum  contractual  payments which were in excess of actual sales.  In June
1998,  the  agreement  was  amended  and the  minimum  royalty  arrangement  was
discontinued.  In 1998, Cytogen  terminated its marketing  agreement with DuPont
and recorded as a charge to Costs of Product and Contract Manufacturing payments
to DuPont of $4.0 million for securing a long-term manufacturing  commitment for
Quadramet from DuPont and $995,000 for manufacturing and distributing  Quadramet
in 1998.

10.  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  $802,000,  $500,000 and $375,000,  in royalty
expense for 2000, 1999 and 1998,  respectively.  Future annual minimum royalties
due to Dow are  $750,000 in 2001 and $1.0  million per year  thereafter  through
2012.

                                      -64-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


11.  REVENUES FROM MAJOR CUSTOMERS

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

                                                         Year Ended December 31,
                                                         -----------------------

                                                         2000     1999     1998
                                                         ----     ----     ----

   Berlex (see Note 8)................................    22%       9%      36%
   Progenics Pharmaceuticals, Inc. (see Note 6).......     6       16         -
   Mallinckrodt Medical Inc...........................    19       16         8
   Medi-Physics.......................................     7       15        10
   Syncor International Corporation...................    11       10         5

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 2000 include the  recognition  of deferred
revenue following the adoption of SAB 101.

12.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                               December 31,
                                                               ------------
                                                           2000           1999
                                                           ----           ----
   Accounts payable.................................   $2,700,000     $1,785,000
   Accrued payroll and related expenses.............    1,791,000      1,309,000
   Accrued research contracts and materials.........      218,000        236,000
   Accrued commission and royalties.................      205,000        404,000
   Accrued professional and legal...................      755,000        422,000
   Facility payable.................................    1,125,000        689,000
   Other accruals...................................      424,000        633,000
                                                       ----------     ----------
                                                       $7,218,000     $5,478,000
                                                       ==========     ==========


13. LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                               December 31,
                                                               ------------
                                                           2000           1999
                                                           ----           ----

   <S>                                                 <C>            <C>
   Due to Elan......................................   $2,280,000     $2,200,000
   Capital lease obligations........................      245,000        378,000
                                                       ----------     ----------

                                                        2,525,000      2,578,000
   Less: Current portion............................     (151,000)      (162,000)
                                                       ----------     ----------

                                                       $2,374,000     $2,416,000
                                                       ==========     ==========
</TABLE>

In August  1998,  Cytogen  received  $2.0  million  from 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 seven
years. The note bears annual interest of 7%, compounded semi-annually,  however,
such  interest is not payable in cash but will be added to the principal for the
first 24 months; thereafter,  interest is payable in cash. In 2000 and 1999, the
Company  recorded  $141,000 and $146,000,  respectively,  in interest expense on
this note.

                                      -65-

<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  2003.  Property  and  equipment  leased under
non-cancellable capital leases have a net book value of $362,000 at December 31,
2000.  Payments to be made under  capital  lease  obligations  (including  total
interest of $40,000) are $183,000 in 2001, $97,000 in 2002 and $5,000 in 2003.

14. COMMON STOCK

In December  1998, the Company sold to the State of Wisconsin  Investment  Board
3,333,334  shares of Cytogen Common Stock at an aggregate price of $2.5 million,
or $0.75 per share.

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
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
Laboratories  ("Berlex") for $1.0 million or $1.00 per share upon an exercise of
a warrant  (see Note 8), 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,  over  the next 20  months,  Cytogen  may,  at its  discretion,  sell
additional shares of its Common Stock to Acqua Wellington at a small discount to
the market price to be determined before each sale provided the Threshold Price,
as defined  therein,  for the Company's  stock is at least $4.00 per share.  The
financing facility is not subject to any minimum takedown requirements,  nor did
the Company pay any financing fees or other compensation in connection with this
transaction.

15. CONVERTIBLE PREFERRED STOCK

In December 1997, Cytogen issued 750 shares of Series B Preferred Stock ("Series
B") for an aggregate price of $7.5 million. The Series B carried a dividend rate
of 6% which was  payable in cash or Common  Stock at the option of  Cytogen.  In
1998, all of the  outstanding  Series B was converted  into 7,377,054  shares of
Cytogen Common Stock including $128,000 of accrued dividends.

16. STOCK OPTIONS

The Company has various  stock  option  plans that  provide for the  issuance of
incentive and non-qualified stock options to employees,  non-employee  directors
and outside  consultants,  for which an aggregate of 7,352,635  shares of Common
Stock have been  reserved.  The  persons to whom  options may be granted and the
number, type, and terms of the options vary among the plans. 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 Common Stock at the
date of grant. Under certain circumstances,  vesting may accelerate.  In January
1998, the Company cancelled  unexercised stock option grants to purchase 671,555
shares  ranging in price from $3.687 to $16.50 per share and issued stock option
grants to purchase  537,244  shares at $1.95 per share which equaled fair market
value at the date of  grant.  This  repricing  was not  available  to  officers,
directors, executives and consultants of the Company. Activity under these plans
was as follows:


                                      -66-

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

<TABLE>
<CAPTION>


                                                                                 Aggregate
                                       Number of          Price Range             Exercise
                                         Shares            Per Share               Price
                                         ------            ---------               -----

<S>                                   <C>                <C>                  <C>
Balance at December 31, 1997           3,825,460         $2.06 - 17.00        $ 19,541,738
   Granted                             4,535,920          0.70 -  2.13           6,388,644
   Cancelled                          (2,319,085)         1.36 - 17.00         (10,480,467)
                                      ----------                              ------------

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

</TABLE>

The following table summarizes  information  about stock options at December 31,
2000:

<TABLE>
<CAPTION>

                                                                                   Outstanding Stock Options
                                                       -------------------------------------------------------
                                                       Exercisable 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       2,440,265             7.6                $1.10             945,948            $1.09
   1.84 -  3.67       1,126,029             8.0                 2.49             375,678             2.18
   3.68 -  5.50         197,500             5.2                 5.04             172,650             5.04
   5.51 -  7.33         343,000             7.7                 5.92              91,800             6.02
   7.34 -  9.17          55,500             5.5                 7.80              39,200             7.67
   9.17 - 11.00         503,000             9.5                10.14                   -                -
  14.66 - 16.50          15,000             0.9                15.69              15,000            15.69
  16.50 - 16.94          16,000             3.7                16.61              12,000            16.50
                      ---------                                                ---------
$  0.70 - 16.94       4,696,294             7.8                $3.10           1,652,276            $2.42
                      =========                                                =========
</TABLE>

At December 31, 2000,  options to purchase 1,652,276 shares of Common Stock were
exercisable  and  1,520,069  shares of 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 an 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.


                                      -67-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The  Company  adopted an  employee  stock  purchase  plan under  which  eligible
employees  may elect to purchase  shares of 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
2000,  1999 and 1998,  employees  purchased  32,385,  29,209 and 54,023  shares,
respectively,   for  aggregate   proceeds  of  $80,000,   $29,000  and  $41,000,
respectively.  The Company has reserved 368,366 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,
                                                                                   -----------------------

                                                                           2000             1999           1998
                                                                           ----             ----           ----
<S>                                                                   <C>                 <C>          <C>
Net income (loss) to common stockholders, as reported                 $(27,298,000)       $729,000     $(13,271,000)
Pro forma net loss to common stockholders                             $(30,689,000)    $(1,103,000)    $(16,601,000)

Basic and diluted net income (loss) per common share, as reported           $(0.37)          $0.01           $(0.24)
Basic and diluted pro forma net loss per common share                       $(0.42)         $(0.02)          $(0.29)
</TABLE>

The  weighted  average  fair value per option of the options  granted  under the
stock option plans during 2000,  1999 and 1998 is estimated as $5.40,  $1.29 and
$0.92, respectively,  on the date of grant using the Black-Scholes pricing model
with the following  assumptions for 2000, 1999 and 1998: dividend yield of zero,
volatility of 120.39%, 87.99% and 78.42%, respectively,  risk-free interest rate
of 5.98%,  5.85% and 5.37%,  respectively,  and an expected life of 5 years. The
average  fair value per option  ascribed to the  employee  stock  purchase  plan
during 2000, 1999 and 1998 is estimated at $1.35, $0.40 and $0.65, respectively,
on the date of grant  using the  Black-Scholes  option  pricing  model  with the
following assumptions for 2000, 1999 and 1998: divided yield of zero, volatility
of 109.83%, 111.48% and 84.75%, respectively,  risk free interest rate of 5.52%,
4.46% and 4.88%,  respectively,  and expected life of three months.  Because the
SFAS No.  123  method of  accounting  is not  required  to be applied to options
granted prior to January 1, 1995,  the resulting pro forma  compensation  charge
may not be representative of that to be expected in future years.

17. 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 $54,000,  $136,000
and $172,000 in 2000, 1999 and 1998, respectively.

18. PENSION PLAN

The Company maintains a defined  contribution  pension plan. 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 pension
expense  was  $40,000,   $182,000   and  $310,000  for  2000,   1999  and  1998,
respectively.

19. INCOME TAXES

As of December 31, 2000, Cytogen had federal net operating loss carryforwards of
approximately $220 million.  The Company also had federal and state research and
development tax credit  carryforwards of approximately  $6.5 million.  These net
operating loss and credit  carryforwards  will expire through 2020. In addition,
certain operating loss and credit carryforwards began to expire in 1995.

                                     -68-
<PAGE>
                      CYTOGEN CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


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>


                                                                 2000               1999
                                                                 ----               ----
  <S>                                                      <C>                 <C>
  Deferred tax assets:
    Net operating loss carryforwards                       $  74,800,000       $ 63,700,000
    Capitalized research and development expenses             15,800,000         17,400,000
    Research and development credit                            6,800,000          6,500,000
    Acquisition of in-process technology                         800,000          1,200,000
    Other, net                                                 5,800,000          6,400,000
                                                           -------------       ------------

         Total deferred tax assets                           104,000,000         95,200,000
         Valuation allowance for deferred tax assets        (104,000,000)       (95,200,000)
                                                           -------------       ------------
           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 100%  valuation  allowance  was  established  on the
acquisition dates as realization of these tax assets is uncertain.

During  2000  and  1999,  the  Company  sold New  Jersey  state  operating  loss
carryforwards  and  research  and  development  credits,  which  resulted in the
recognition of a $1.6 million and $2.7 million tax benefit, respectively.

20. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain  equipment  under  non-cancellable
operating  leases  that  expire at various  times  through  2004.  Rent  expense
incurred on these  leases was $1.3  million,  $998,000 and $1.6 million in 2000,
1999 and 1998,  respectively.  Minimum  future  obligations  under the operating
leases are $2.4  million as of  December  31,  2000 and will be paid as follows:
$1.4 million in 2001, $495,000 in 2002, $213,000 in 2003, and $209,000 in 2004.

The Company is obligated  to make minimum  future  payments  under  research and
development contracts that expire at various times. As of December 31, 2000, the
minimum future  payments under  contracts are $530,000 in 2001 and $130,000 each
year from 2002 and  thereafter.  In  addition,  the Company is  obligated to pay
royalties on revenues from commercial product sales including certain guaranteed
minimum payments.


                                      -69-
<PAGE>


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


21. CONSOLIDATED QUARTERLY FINANCIAL DATA - UNAUDITED

The following  table  provides  quarterly  data for the years ended December 31,
2000 and 1999.
<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>


     Amounts for each of the first three  quarters of 2000 have been restated to
give  effect  for  the   implementation   of  SAB  101  in  the  fourth  quarter
retroactively  to  January 1, 2000.  The  impact of the  change  resulted  in an
increase in total revenues and corresponding  decrease in loss before cumulative
effect of a change in accounting  principle of $215,000 for each of the quarters
ended  September  30, June 30, and March 31 as  compared  to amounts  previously
reported in Form 10-Q filed with the SEC.



                                      -70-
<PAGE>


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

<TABLE>
<CAPTION>


                                                                       Three Months Ended
                                                   ------------------------------------------------------
                                                   March 31,      June 30,       Sept. 30,       Dec. 31,
                                                     1999           1999           1999            1999
                                                   --------       --------       --------       ---------
                                                         (amounts in thousands except per share data)

<S>                                                <C>            <C>            <C>            <C>
Total revenues ..............................      $  2,324       $  4,450       $  2,346       $  2,082

Total operating expenses ....................         4,018          5,428          3,649          3,790
                                                   --------       --------       --------       --------

         Operating loss .....................        (1,694)          (978)        (1,303)        (1,708)

Gain on sale of laboratory and
 manufacturing facilities ...................         3,298             --             --             --
Other income, net ...........................            53             14             71            274
                                                   --------       --------       --------       --------

         Income (loss) before income taxes ..         1,657           (964)        (1,232)        (1,434)
Income tax benefit ..........................            --             --             --         (2,702)
                                                   --------       --------       --------       --------

Net income (loss) ...........................      $  1,657       $   (964)      $ (1,232)      $  1,268
                                                   ========       ========       ========       ========

Basic and diluted net income (loss) per share      $   0.03       $  (0.01)      $  (0.02)      $   0.02
                                                   ========       ========       ========       ========

Weighted average common share outstanding
   Basic ....................................        64,192         65,632         68,757         70,414
                                                   ========       ========       ========       ========
   Diluted ..................................        64,496         65,632         68,757         72,307
                                                   ========       ========       ========       ========

</TABLE>


                                      -71-