<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                   FORM 10-K

                ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE

                        SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001   Commission File No. 0-19312

                                 MEDAREX, INC.
            (Exact name of registrant as specified in its charter)

                     New Jersey                           22-2822175
           (State or other jurisdiction of               (IRS Employer
            incorporation or organization)            Identification No.)

           707 State Road, Princeton, New Jersey             08540
          (Address of principal executive offices)        (Zip Code)

   Registrant's telephone number, including area code:  (609) 430-2880

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

         Title of each class          Name of each exchange on which registered
   Common Stock ($0.01 par value)     The NASDAQ Stock Market under symbol MEDX

   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.   [_]

   As of December 31, 2001, the registrant had outstanding 72,876,240 shares of
Common Stock, $0.01 par value ("Common Stock"), which is registrant's only
class of Common Stock.

   The aggregate market value of registrant's Common Stock held by
non-affiliates based on the closing price of $14.95 per share on March 1, 2002
was approximately $1,056,098,000.

                      DOCUMENTS INCORPORATED BY REFERENCE
 (Specific pages incorporated are identified under the applicable item herein)

   Portions of the registrant's definitive Proxy Statement for the annual
meeting of shareholders to be held on May 22, 2002 (the "Proxy Statement") are
incorporated by reference in Part III of this Report. Other documents
incorporated by reference in this report are listed in the Exhibit Index.

<PAGE>

                                    PART I

   In this Annual Report, "Medarex" or the "company," "we," "us" and "our"
refer to Medarex, Inc. and our wholly owned subsidiaries. This Annual Report
contains forward-looking statements that involve risk and uncertainties. Our
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" as well as those discussed elsewhere in this document. Actual events
or results may differ materially from those discussed in this Annual Report.

   Medarex(R) and HuMAb-Mouse(R) are registered U.S. trademarks of Medarex,
Inc. UltiMAb(TM), UltiMAb Human Antibody Development SystemSM, KM-Mouse(TM) and
Trans-Phage Technology(TM) are trademarks or service marks of Medarex, Inc. All
other company names, trademarks and service marks included in this Annual
Report are trademarks, registered trademarks, service marks or trade names of
their respective owners.

Item 1.  Business

Overview

   We are a biopharmaceutical company focused on the discovery and development
of human antibody-based therapeutic products. Our UltiMAb Human Antibody
Development System/SM enables us to rapidly create and develop therapeutic
products for a wide range of potential diseases, including cancer,
inflammation, auto-immune disease and other life-threatening and debilitating
diseases. /

   We believe that antibodies are proven candidates for therapeutic products.
To date, the United States Food and Drug Administration, or FDA, has approved
eleven antibody-based therapeutic products for sale in the United States.
During the past three years, these products generated aggregate worldwide sales
in excess of $6 billion, with sales doubling from 1999 to 2001. We intend to
participate in this market, and to this end, are developing an expanding
pipeline of therapeutic antibody products developed through the use of our
proprietary UltiMAb(TM) technology. Multiple therapeutic products generated
using our technology are in various stages of human clinical trials, including
several of which we are developing using our own resources and others where we
have licensed our technology to our partners for their use in the development
of their products. We and our partners also have a number of product candidates
in preclinical development.

   As of March 1, 2002, 41 pharmaceutical and biotechnology companies have
partnered with us to jointly develop and commercialize products or have
otherwise acquired rights to use our proprietary technology in their
development of new therapeutic products. These companies include industry
leaders such as Amgen, Inc., Centocor, Inc. (a subsidiary of Johnson &
Johnson), Eli Lilly & Company, Human Genome Sciences, Inc., Immunex
Corporation, Novartis Pharma AG, Novo Nordisk A/S and Schering AG. Some of
these are licensing partnerships, providing us with licensing fees, milestone
payments and royalty payments; others are collaborative partnerships that
provide for the sharing of product development costs, revenues, expenses and
profits.

   In addition to our UltiMAb Human Antibody Development System, we have
considerable experience in preclinical and clinical development as well as in
manufacturing antibodies for clinical trials. Our existing manufacturing
facility in Annandale, New Jersey currently has the capacity to produce up to
approximately 10 kilograms of monoclonal antibodies per year for clinical
development purposes, and we are implementing a strategy that contemplates
increased developmental capacity and large-scale clinical production. We have
assembled a team of experienced scientific, production, clinical and regulatory
personnel to facilitate the discovery, development and commercialization of
antibody-based products for us and for our partners. We intend to add sales and
marketing and additional manufacturing capabilities as needed.

   Our goal is to be a leader in the discovery and development of human
antibody-based therapeutics for the treatment of cancer and other
life-threatening and debilitating diseases. To this end, we have implemented a
business strategy involving the expansion and diversification of our product
pipeline and partnerships and an

                                      2

<PAGE>

increase in our resources to develop, manufacture and commercialize products.
We intend to capitalize on the value of our own human antibody products by
developing them through late stage clinical trials and/or regulatory approval.
We believe this will allow us to retain substantial commercial rights or profit
sharing opportunities with regard to these products. In addition, we are
enhancing and expanding our partnerships, which provides us the opportunity to
participate in the development of substantially more product candidates than we
could develop using only our own resources. We believe our business strategy
will allow us to capitalize on our broad range of product development
capabilities thereby maximizing the value of our business.

Scientific Background

   Antibodies are natural proteins produced in the human body by B cells and
serve as an important defense against disease. Human B cells produce millions
of different types of antibodies, all with varying shapes that cause them to
attach to and, as a result, neutralize different disease targets. For example,
certain antibodies seek out and attach to viruses, bacteria and diseased cells,
making them susceptible for destruction by the human immune system. Others
attach to specific disease targets and block their interaction with other
molecules. Each monoclonal antibody has a unique molecular structure that
directs it to a specific target.

   About twenty-five years ago, scientists recognized that if antibodies could
be created in the laboratory, they could potentially function as a powerful
tool for the treatment of many diseases. These efforts were partially
successful when scientists discovered a way to make monoclonal antibodies using
laboratory mice. Mouse-generated monoclonal antibodies, however, were often
rejected by patients whose immune systems recognized them as foreign because
they were not human proteins, and the patients produced a human anti-mouse
antibody, or HAMA, response. This response reduces the effectiveness of the
antibody by neutralizing the binding activity and by rapidly clearing the
antibody from circulation in the body. The HAMA response can also cause
significant toxicities with subsequent administrations of mouse antibodies.

   Subsequent generations of antibodies have been re-engineered to address
these immunogenic complications, resulting in monoclonal antibodies that are
less mouse and more human. Scientists developed "chimeric antibodies," which
still contain mouse protein sequences (approximately 33%) but also contain
human protein sequences (approximately 66%). Although chimeric antibodies are
"more human" and theoretically, less likely to trigger an immune reaction, they
nonetheless can trigger a human anti-chimera antibody response by the human
immune system. Scientists then developed CDR-grafted or "humanized" antibodies
which contain approximately 5% to 10% mouse protein sequences.

   Through our UltiMAb Human Antibody Development System, we can create all
types of antibodies that are fully human (100% human protein sequences) by
using transgenic mice in which mouse antibody gene expression is suppressed and
effectively replaced with human antibody gene expression. Because our mice
contain genes encoding human antibodies, we believe the monoclonal antibodies
we generate are more likely to have favorable safety profiles and be eliminated
less rapidly from the human body, potentially reducing the frequency and amount
of dosing required to affect disease targets. Additionally, our fully human
monoclonal antibodies do not require any humanization, a process that at times
has proven to be challenging and time consuming, and can result in antibodies
with lowered affinities for their respective targets.

Products in Development

   We have identified a number of potentially promising monoclonal antibodies,
which we are developing on our own or in collaborations with our partners. A
number of therapeutic antibody product candidates generated by us and by our
partners using our proprietary technology are in various stages of human
clinical testing. In addition, our preclinical development pipeline includes
product candidates for a variety of indications, such as oncology,
autoimmune/inflammatory diseases and infectious diseases.

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   The following table summarizes the potential therapeutic applications and
development stages for our active product candidates and those of our partners
(in those cases where our partners have made specific public announcements
regarding such product candidates), and is followed by brief descriptions of
each specific program.

<TABLE>
<CAPTION>
          PRODUCT                   INDICATION                   STATUS                CURRENT RIGHTS
          -------                   ----------                   ------                --------------
         (Target)
<S>                         <C>                         <C>                       <C>

Medarex Product Candidates in Clinical Development

  MDX-33                    Idiopathic                  Phase II                  Worldwide, co-developing
  (CD64)                    thrombocytopenia purpura                              with Aventis Behring
                            (ITP)                                                 L.L.C.

  MDX-010                   Prostate cancer             Phase I/II                Worldwide
  (CTLA-4)

  MDX-010                   Malignant melanoma          Phase I/II                Worldwide
  (CTLA-4)

  MDX-010                   Melanoma                    Phase I/II                Worldwide
  (CTLA-4)                  vaccine--Melacine(R)

  MDX-010                   Melanoma                    Phase I/II                Worldwide
  (CTLA-4)                  vaccine--melanoma peptides

  MDX-44                    Psoriasis and other         Phase I/II                Worldwide
  (CD64 + toxin)            dermatological disorders

Out-Licensed Product Candidates in Clinical
   Development

  IDM-1*                    Ovarian cancer              Phase III                 Licensed to
  (Her2 & CD64)                                                                   Immuno-Designed Molecules
                                                                                  S.A.** for the field of
                                                                                  Cell Therapy

  HuMax(TM)-CD4             Rheumatoid                  Phase III                 Licensed to Genmab A/S in
  (CD4)                     arthritis--TNFa inhibitor                             North America**; licensed
                            and methotrexate failure                              to Eisai Co. Ltd. in Asia
                                                                                  and Europe

  HuMax-CD4                 Rheumatoid                  Phase II                  Licensed to Genmab A/S in
  (CD4)                     arthritis--moderate/severe                            North America**; licensed
                                                                                  to Eisai Co. Ltd. in Asia
                                                                                  and Europe

  HuMax-CD4                 Psoriasis                   Phase II                  Licensed to Genmab A/S in
  (CD4)                                                                           North America**; licensed
                                                                                  to Eisai Co. Ltd. in Asia
                                                                                  and Europe

  HuMax-IL15                Rheumatoid arthritis        Phase I/II                Licensed to Genmab A/S**
  (IL-15)

  Centocor/J&J Antibody     Anti-inflammatory diseases  Phase I                   Licensed to Centocor, Inc.
  (undisclosed)

Antibody Product Candidates in Preclinical
  Development

  MDX-070                   Prostate cancer             Preclinical               Worldwide, co-developing
  (PSMA)                                                                          with Northwest
                                                                                  Biotherapeutics, Inc.

  MDX-060                   Hodgkin's lymphoma          Preclinical Preclinical   Worldwide
  (CD30)                    Anaplastic large cell                                 Worldwide
                            lymphoma

  HuMax-EGFr                Cancer                      Preclinical               Licensed to Genmab A/S**
  (EGFr)

  Anti-heparanase I         Breast and other cancers    Preclinical               Worldwide, co-developing
                                                                                  with Oxford GlycoSciences
                                                                                  plc
</TABLE>
--------
 * Formerly referred to by us as MDX-210.
** We received equity interests in these partners in exchange for licenses of
   our proprietary antibody technology. We are not entitled to licensing,
   milestone or other payments from these licenses.

                                      4

<PAGE>

Medarex Product Candidates in Clinical Development

   MDX-33 (Anti-CD64 Antibody)--Idiopathic Thrombocytopenia Purpura
(ITP).  MDX-33 is a humanized antibody that targets CD64 (the immunoglobulin
receptor Fc gammaR1) that is expressed on myeloid progenitor cells, monocytes,
macrophages, human cytotoxic effector cells, activated neutrophils and
dendritic cells. MDX-33 is designed for the treatment of ITP, an autoimmune
condition in which patients' platelets are destroyed by their own immune
system. Conventional treatments include steroids, removal of the spleen and
high doses of intravenous IgG. In a Phase II clinical study, administration of
MDX-33 appeared to substantially elevate platelet counts in patients treated
with the highest dose. Further development is under evaluation.

   MDX-010 (Anti-CTLA-4 Antibody)--Prostate Cancer, Malignant Melanoma,
Melanoma Vaccines. MDX-010 is a fully human antibody that targets an immune
receptor known as CTLA-4. This receptor, which is a protein found on the
surface of T-cells, normally functions to suppress the immune response to
tumors or infectious agents. By using a fully human antibody to block the
activity of CTLA-4, we believe that patients' immune systems may be able to
mount a stronger immune response against foreign pathogens and cancers. We
initially focused on the use of this antibody in the treatment of prostate
cancer and malignant melanoma. In January 2002, we expanded our focus and
announced plans for a multi-pronged tumor vaccine clinical program employing
different melanoma vaccines used in conjunction with MDX-010. Preclinical data
suggests that MDX-010, when combined with certain tumor vaccines, may enhance
the anti-tumor effects of such vaccines. We are conducting the following trials
for this product:

   Prostate Cancer;  Malignant Melanoma:  We began Phase I/II clinical trials
of MDX-010 in patients with prostate cancer and melanoma, respectively, during
2000. Interim findings indicated that MDX-010 was generally well tolerated with
evidence of immunologic and antitumor activity. Based on these results, we
intend to initiate further trials to test repeated dosing of the antibody used
alone and in combination with other anti-cancer therapies.

   Melanoma Vaccines:  As part of our tumor vaccine program, three separate
Phase I/II clinical trials of MDX-010 are currently underway. Additional
vaccines coupled with MDX-010 are expected to enter clinical trials during 2002.

   MDX-44 (Anti-CD64 + Toxin Antibody)--Psoriasis, other dermatological
disorders.  MDX-44 is a humanized antibody that targets CD64 (see discussion of
MDX-33 above) that has been conjugated to a toxin. Application of MDX-44 will
target for destruction macrophages and other CD64 expressing effector cells
that play key roles in psoriasis and other dermatologic disorders. An
investigator initiated Phase I study of MDX-44 in atopic dermatitis was
completed in 2001.

Out-Licensed Product Candidates in Clinical Development

   IDM-1* (Anti-Her2 & CD64 Antibody)--Ovarian Cancer.  IDM-1, currently being
developed by our partner, IDM, is a humanized, bispecific antibody-based Cell
Drug(TM) for the treatment of ovarian cancer. Phase III trials for IDM-1
targeting patients with Stage III ovarian cancer began in Europe in early 2000,
and additional trials in Australia and Canada were added in 2001. IDM has
reported that the aim of the Phase III studies is to prolong remission of Stage
III ovarian cancer after a positive response to a standard protocol consisting
of surgery, followed by two chemotherapies.

   HuMax-CD4** (Anti-CD4 Antibody)--Rheumatoid Arthritis;
Psoriasis.  HuMax-CD4, being developed by our partner, Genmab, is a high
affinity, fully human antibody that targets the CD4 receptor on cells known as
T-cells, which are believed to be involved in promoting autoimmune disease.
Preclinical and clinical studies to date suggest that an antibody that targets
CD4 may be useful for the treatment of several inflammatory diseases

--------
 * Formerly referred to by us as MDX-210.
** We received equity interests in these partners in exchange for licenses of
   our proprietary antibody technology.  We are not entitled to licensing,
   milestone or other payments from these licenses.

                                      5

<PAGE>

including rheumatoid arthritis and psoriasis. HuMax-CD4 has been designated a
"Fast Track" product by the FDA, potentially accelerating its development and
FDA review. The following clinical trials are being conducted by Genmab for
this product:

   Rheumatoid Arthritis:  In December 2001, Genmab announced the initiation of
a Phase III clinical trial with HuMax-CD4 to treat patients with active
rheumatoid arthritis who have failed to respond to treatment with methotrexate
and TNF-a blocking agents. This trial is expected to involve approximately 400
patients at 50 sites in the United States and Europe. Genmab is also currently
conducting a Phase II trial for HuMax-CD4 in a broader arthritis population
consisting of patients with moderate to severe arthritis undergoing
methotrexate therapy. Genmab reported that blinded safety data from this study
was presented to the FDA prior to its approval of the Phase III trial.

   Psoriasis:  Genmab initiated a Phase II clinical trial of HuMax-CD4 in
January 2001 for the treatment of moderate to severe psoriasis. Genmab reported
that the HuMax-CD4 appeared to be safe and well tolerated and that mean
Psoriasis Area Severity Index was reduced in all treatment groups. Genmab has
reported further that it intends to proceed to Phase IIb trials of HuMax-CD4 in
psoriasis in the second half of 2002.

   HuMax-IL15** (Anti-IL-15 Antibody)--Rheumatoid Arthritis.  HuMax-IL15 is a
high affinity, fully human antibody against Interleukin-15 (IL-15) being
developed by Genmab through a collaboration with Immunex. IL-15 is a cytokine,
an immune system signaling molecule that appears early in the cascade of events
that ultimately lead to inflammatory disease. Genmab initiated Phase I/II
trials of HuMax-IL15 to investigate its utility for the treatment of patients
with active rheumatoid arthritis. Genmab has stated that this multi-center,
placebo-controlled study will test up to six dose levels and include
approximately 30 patients.

   Centocor/J&J Antibody--Anti-inflammatory diseases.  Centocor is developing a
high affinity, fully human antibody for an anti-inflammatory application. Phase
I trials are currently underway.

Antibody Product Candidates in Pre-Clinical Development:

   MDX-070 (Anti-PSMA Antibody)--Prostate Cancer.  MDX-070 is a fully human
antibody, developed in collaboration with Northwest Biotherapeutics, Inc. that
targets Prostate Specific Membrane Antigen, or PSMA. PSMA is a cell surface
marker that is preferentially expressed on normal prostate tissue on malignant
prostate tissues, and also on blood vessels in other tumors. Preclinical data
suggests that the antibody will target live prostate tumor cells.

   MDX-060 (Anti-CD30 Antibody)--Lymphoma.  MDX-060 is a fully human antibody
that targets CD30, which is a marker for activated lymphocytes and is present
on the malignant cells of Hodgkin's Disease and anaplastic large cell lymphoma.
Through its ability to target CD30 expressing tumor cells, MDX-060 may
facilitate the elimination of such cells by the human immune system.
Preclinical studies are ongoing with respect to this antibody.

   HuMax-EGFr** (Anti-EGFr Antibody)--Cancer.  HuMax-EGFr, being developed by
Genmab, is a fully human antibody targeting the Epidermal Growth Factor
receptor, or EGFr. EGFr is a receptor molecule that has been found in excess on
many tumor cells, including carcinoma of the head and neck, breast, colon,
prostate, lung and ovary. Preclinical studies have indicated that blocking the
interaction between EGFr and its ligands has the potential to inhibit tumor
growth leading to cell death.

   Anti-heparanase I--Breast and Other Cancers.  We are working with Oxford
GlycoSciences plc, or OGS, to create human antibody therapeutics and/or tumor
vaccines based on an initial set of disease targets. The first product
candidate emerging from the program is a fully human antibody that binds to and
neutralizes the heparanase I enzyme, which is involved in invasion and
metastasis in many tumor types, including breast cancer

--------
** We received equity interests in these partners in exchange for licenses of
   our proprietary antibody technology. We are not entitled to licensing,
   milestone or other payments from these licenses.

                                      6

<PAGE>

and other common cancers. Preclinical testing suggests that this antibody has
the potential to prevent tumor growth and to reduce metastasis to limit the
spread of the disease.

   Others--We have an active clinical and preclinical development program,
which includes identified projects that we anticipate will lead to new
antibodies and novel combinations with antibodies currently in development,
such as additional candidates for our MDX-010 tumor vaccine program. We expect
these development efforts to lead to additional clinical candidates in the near
and long term.

Strategic Investments

   Genmab

   In March 1999, we and a group of unrelated third party investors formed
Genmab A/S, a Danish biotechnology company. Genmab was established to develop
and commercialize a portfolio of fully human antibodies derived from our
HuMAb-Mouse(R) technology. Initially, we contributed a license to our human
antibody technology for producing antibodies to particular targets in exchange
for approximately 44% of Genmab's share capital. During Genmab's initial 12
months of operation, Genmab raised additional equity and, in connection
therewith, we agreed to expand our license to provide Genmab with broader
rights to our human antibody technology in exchange for further equity, thereby
maintaining our level of ownership in Genmab's share capital. Specifically, in
exchange for equity, we granted Genmab 16 fully paid-up commercial licenses for
antibody products. In addition, in connection with a private placement in May
2000, we made an additional cash investment in Genmab thus maintaining our
approximately 44% ownership interest in Genmab. In August 2000, we received
additional equity in connection with the Genomics Agreement (as described
below) which increased our equity interest in Genmab to approximately 45%.

   In August 2000, we entered into a binding memorandum of understanding, or
the Genomics Agreement, with Genmab, pursuant to which we granted Genmab rights
to market our transgenic mouse technologies for multi-target (five or more
targets) genomics partnerships to certain pharmaceutical and biotechnology
companies whose headquarters are located in Europe. Under the terms of the
Genomics Agreement, Genmab may market our human antibody technology for
multi-target partnerships to any European based company, or for
non-multi-target (less than five targets) partnerships, to any company
worldwide, except for: (i) certain Medarex partners, including Novartis, Merck
KGaA, Schering, Aventis Behring, IDM and Scil Biomedicals GmbH; and (ii) any
European based pharmaceutical company with worldwide revenues in excess of $1
billion in 1999, provided, however, that Genmab may market our human antibody
technology to Sanofi/Synthelabo and Boehringer Ingelheim. We also have the
right to participate in Genmab's multi-target partnerships, thereby sharing in
certain costs and commercial benefits (see the section below entitled Our Joint
Collaborations with Genmab). We retain all rights to market our technology to
companies headquartered outside of Europe and to all companies for
non-multi-target partnerships in Europe. Certain license fees, milestones and
royalties due to us under our previously existing agreement with Genmab were
reduced. The Genomics Agreement also provides that, under certain
circumstances, we must negotiate in good faith to manufacture antibodies for
Genmab's partnerships.

   In addition, under the terms of the Genomics Agreement, we granted Genmab an
option to receive certain rights in Europe with respect to the development and
commercialization of up to four antibody products we may obtain through our
alliance with Eos Biotechnology, Inc. Finally, the Genomics Agreement grants
Genmab certain rights to access technologies acquired by us from Biosite
Incorporated and Kirin Brewery Co., Ltd.

   The Genomics Agreement has an initial term of five years with a right
exercisable by Genmab to extend the term for an additional two years. For each
year of the agreement and during the term of any extension, we will receive $2
million per year from Genmab. At Genmab's option, these amounts may be paid in
either cash or capital stock. As part of this transaction, in August 2000, we
received 279,760 shares of Genmab stock valued at $2 million, representing
payment for the first year. In August 2001, we received $2 million in cash for
the second annual payment.

                                      7

<PAGE>

   In September 2000, we entered into an amended agreement, or the Amended
Genomics Agreement, with Genmab, pursuant to which we agreed to assign to
Genmab 100% of our economic interest in each product we jointly develop with
OGS, or a Medarex/OGS product, and sell in Europe, and 50% of our economic
interest in each Medarex/OGS product sold outside of North America and Europe.
Under the terms of the Amended Genomics Agreement, if a Medarex/OGS product is
intended to be sold only in Europe, Genmab will reimburse us for 100% of our
research, development, manufacturing and commercialization expenses associated
with such product. If the Medarex/OGS product is to be sold only in North
America, Genmab will not be obligated to reimburse us for any such expenses. In
all other cases, Genmab will reimburse us for 50% of such expenses. The first
potential product candidate which may be subject to this arrangement is an
anti-heparanase I antibody (see the section above entitled Products in
Development). In addition, we sold one-half of our equity interest in OGS to
Genmab for $2.5 million, which was our original cost of such equity interest.

   In October 2000, Genmab became a publicly listed company on the Copenhagen
Stock Exchange and the German Neuer Markt. As a result of raising the
equivalent of $187 million (based on the then current exchange rate), our
ownership interest in Genmab was reduced to approximately 33%. We currently
account for our investment in Genmab under the equity method of accounting.

   IDM

   During the past few years, the focus of our business has shifted from
humanized and murine monoclonal antibody-based products to fully human antibody
development. As a result, in July 2000, we entered into an agreement with IDM
whereby we licensed to IDM certain of our humanized and murine technologies in
exchange for equity units in IDM. Under the agreement, IDM has acquired
worldwide rights to the use of our MDX-210 anti-HER2 product in connection with
cell therapy. IDM initiated a Phase III clinical trial of MDX-210, referred to
by IDM as "IDM-1," in ovarian cancer in connection with IDM's macrophage
activated killer, or MAK(TM), cells in 2000 and received regulatory approval
for additional trials in 2001. IDM has also acquired certain rights to MDX-220
and MDX-447 in all fields. We originally developed MDX-447 in conjunction with
Merck KGaA. IDM has also acquired the right to receive royalty payments from
third party sales of MDX-210 in Europe, outside the field of cell therapy.

   As a result of this transaction, we recorded a gain from the transfer of
this technology of approximately $40.5 million (based upon an independent
valuation). The Company is recognizing this gain over a two year period for
financial statement purposes (see Note 13 to the Consolidated Financial
Statements). In October 2000 we participated in a private placement of equity
interests in IDM and purchased additional equity of approximately $5.2 million.
Our equity position in IDM after completion of the private placement is
approximately 6%. In the event that we exercise certain warrants held by us to
purchase convertible or redeemable bonds of IDM and such bonds are converted or
redeemed, our equity position in IDM would be approximately 29%. These warrants
are exercisable between September 2002 and September 2010, and such bonds may
be converted or redeemed within six months of such exercise.

Our Human Antibody Partnering Business

   As of March 1, 2002, we have established partnerships with 41 companies to
use our proprietary technology to produce fully human monoclonal antibodies to
potential disease targets. We expect that substantially all of our operating
revenues over the next few years will come from licensing fees and milestone
payments from our existing and future corporate partners. These partnerships
typically provide our corporate partners with access to our human antibody
technology for the purpose of generating fully human antibodies to specific
disease targets identified by such partners. In some cases, we provide our mice
to our corporate partners who then immunize the mice to generate fully human
antibodies. In other cases, we may immunize the mice with a partner's antigen.

   In general, and as listed below, our partnerships fall into three
categories: (1) collaborative partnerships in which we collaborate with
partners to jointly generate, develop and commercialize human antibody products;

                                      8

<PAGE>

(2) licensing partnerships in which we license our human antibody generation
technology to our partners; and (3) other collaborations involving a
combination of licenses and/or joint development and commercialization.

<TABLE>
<CAPTION>
          1.  Collaborative Partnerships  Date of Agreement
          ------------------------------  -----------------

          <S>                             <C>
          ZYCOS Inc.                      January 2002
          Tularik Inc.                    January 2002
          Ambit Biosciences Corporation   November 2001
          m-phasys GmbH                   November 2001
          Incyte Genomics, Inc.           October 2001
          Epicyte Pharmaceuticals, Inc.   July 2001
          Sangamo BioSciences, Inc.       June 2001
          deCODE genetics, Inc.           June 2001
          Glaucus Proteomics B.V.         April 2001
          NeuroTherapeutics, Inc.         April 2001
          Northwest Biotherapeutics, Inc. April 2001
          Eos Biotechnology, Inc.         February 2001, February 2000
          Immusol, Inc.                   February 2001
          Seattle Genetics, Inc.          February 2001
          Gemini Genomics plc             December 2000
          Epigen, Inc.                    November 2000
          Oxford GlycoSciences plc        September 2000
          Athersys, Inc.                  August 2000
          Corixa Corporation              June 2000
          Regeneron Pharmaceuticals, Inc. March 2000
</TABLE>
<TABLE>
<CAPTION>

         2.  Licensing Partnerships         Date of Agreement
         --------------------------         -----------------
         <S>                                <C>
         Genesto A/S                        August 2001
         Human Genome Sciences, Inc.        July 2001
         NovImmune, S.A.                    May 2001
         Schering-Plough Corporation        March 2001
         B. Twelve, Inc.                    January 2001
         Novo Nordisk A/S                   January 2001
         Eli Lilly & Company                January 2001, November 2000
         ZymoGenetics, Inc.                 October 2000
         Oxford GlycoSciences plc           September 2000
         Corixa Corporation                 June 2000
         MedImmune, Inc.                    June 2000
         Centocor, Inc. (subsidiary of J&J) May 2000, February 1997
         Raven Biotechnologies, Inc.        March 2000
         Amgen, Inc.                        September 1999
         Eos Biotechnology, Inc.            August 1999
         Schering AG                        May 1999, February 1998
         Genmab A/S                         March 1999, August 2000
         Millenium Pharmaceuticals, Inc.    February 1999, January 1995
         Immunex Corporation                January 1999
         Novartis Pharma AG                 November 1998
         FibroGen, Inc.                     July 1998
</TABLE>
<TABLE>
<CAPTION>

                  3.  Other Collaborations  Date of Agreement
                  ------------------------  -----------------
                  <S>                       <C>
                  Sangamo BioSciences, Inc.   January 2002
                  Biosite Incorporated        June 2000
                  Kirin Brewery Co., Ltd.     December 1999
                  Aventis Behring, L.L.C.     April 1996
</TABLE>

                                      9

<PAGE>

   Our Collaborative Partnerships to Jointly Develop Fully Human Antibodies
   with Our Partners

   General.  Industry analysts have suggested that scientists in the fields of
genomics and proteomics may eventually identify as many as 10,000 novel target
antigens in the human genome. Many of these antigens may be appropriate for
monoclonal antibody-based products. We are pursuing an "Applied Genomics"
strategy in order to gain access to new target antigens as they are identified,
while also sharing the risks and rewards of the related antibody development
and commercialization. To this end, we have established a number of
collaborations with leading companies in the fields of genomics and proteomics.
We and our Applied Genomics collaborators plan to jointly develop and
commercialize human antibody products. Typically, our collaborator will provide
a target antigen, and we will generate antibodies against that antigen using
our UltiMAb Human Antibody Development System. We and our collaborators
typically agree to share equally costs of clinical development and
manufacturing as well as revenues, expenses and profits associated with the
products that are sold commercially.

   Our Joint Collaborations with Genmab.  Under the terms of the Genomics
Agreement with Genmab, we have established multi-target collaborations with
Genmab and each of deCODE Genetics, Glaucus Proteomics and Gemini Genomics.
These collaborations are similar in structure to the collaborative partnerships
discussed above, except that our interest in the collaboration is shared with
Genmab. Specifically, with respect to the Genmab/Medarex interest in such
collaborations, we assume 100% of the economic costs and benefits associated
with commercialization of products for North America; Genmab assumes 100% of
such costs and benefits for products intended to be sold in Europe; and we
share costs and benefits equally with Genmab with respect to other territories.

   Our Licensing Partnerships for the Development of Fully Human Antibodies by
   Our Partners

   Our licensing partners typically obtain licenses to one or more of our
antibody generating technologies which allow these partners to develop and
commercialize antibody-based products using our technology. We could receive
license fees, milestones and royalties in connection with each of these
products. Under these licenses, there is usually an initial period during which
our corporate partner may elect to enter into a research license for antibodies
to a particular designated target. Subsequently, our corporate partner may
elect to obtain a commercial license for monoclonal antibodies to a particular
target. In some cases, once a corporate partner has obtained a commercial
license for monoclonal antibodies to a given target, we can no longer license
our human antibody technology to a different company for that particular target.

   The financial terms of our licensing partnerships typically include license
fees and a series of milestone payments commencing upon initiation of clinical
trials and continuing through to commercialization. These fees and milestones
may total up to $7 to $10 million per antibody if the antibody receives
approval from the FDA and equivalent foreign agencies. A licensing partnership
may involve multiple antibodies. Under these partnerships, we will also receive
royalties on any product sales. In some cases, our corporate partners reimburse
us for research and development activities conducted on their behalf.
Generally, under the terms of these agreements, our corporate partners are
responsible for all costs of product development, manufacturing and marketing
of any products.

   Other Collaborations

   Kirin.  In December 1999, we entered into a binding letter of intent with
Kirin Brewery Co., Ltd. providing for the global commercialization of
technology for creating fully human monoclonal antibodies. Under the terms of
this letter of intent, Kirin was designated as the primary distributor of our
HuMAb-Mouse technology in Asia, and we were designated as the primary
distributor of Kirin's TC Mouse(TM) outside of Asia. Kirin paid us $12 million
in upfront fees. We have exchanged broad cross-licenses with Kirin, subject to
license, milestone and royalty payments by each party to the other, for use of
each other's technology for the development of human antibody therapeutic
products. The binding letter of intent with Kirin includes the principal terms
of the transaction. These terms are not subject to change except upon mutual
consent and will be incorporated into a

                                      10

<PAGE>

definitive agreement. Any additional terms are subject to the execution of the
definitive agreement. Under the terms of the letter of intent, any
disagreements that arise with respect to such additional terms are subject to
binding arbitration. As part of our partnership with Kirin, we have recently
expanded our fully-integrated human antibody technology platform with the
development of the KM-Mouse, a unique crossbred mouse which combines the traits
of our HuMAb-Mouse with Kirin's TC Mouse, as the newest addition to our UltiMAb
Human Antibody Development System.

   Aventis Behring.  In April 1996, we announced a collaborative arrangement
with Aventis Behring L.L.C. to jointly develop MDX-33, a humanized monoclonal
antibody for the treatment of a variety of autoimmune hematological disorders.
MDX-33 is designed for the treatment of ITP, an autoimmune condition in which
patients' platelets are destroyed by their own immune systems. Conventional
treatments include steroids, removal of the spleen and high doses of
intravenous IgG. In a Phase II clinical study, administrations of MDX-33
appeared to substantially elevate platelet counts in patients treated with the
highest dose. Further development is under evaluation.

   Under the terms of the agreement, Aventis Behring will finance product
development through Phase II clinical trials up to a maximum of $20 million.
Upon successful completion of these clinical trials, Aventis Behring will also
fund Phase III clinical trials, regulatory approvals and commercial launch
costs. Subject to the terms of the agreement, we could receive payments from
Aventis Behring for the achievement of specific milestones. Upon
commercialization, Aventis Behring will have exclusive worldwide marketing
rights to MDX-33 for autoimmune hematological disorders, and we will be
entitled to royalty payments and may also manufacture the product for Aventis
Behring.

   Biosite.  In June 2000, we entered into an agreement with Biosite
Incorporated aimed at accelerating drug research via Trans-Phage
Technology/SM/. This high throughput method to create fully human antibodies
combines the immunological power of our human antibody technology with the
speed of Biosite's Omniclonal/TM/ phage display technology. Through this
partnership, we believe that we and Biosite will be able to offer
pharmaceutical and biotechnology companies access to large volumes of
high-affinity, fully human antibodies to validate genomic targets and to
identify promising drug candidates. Under the terms of the agreement, Biosite
will receive research funding of $3 million per year over eight years from us,
along with research fees and, if any products are generated through the
partnership, milestone payments and royalties. Biosite may also receive
diagnostic rights to targets identified through the partnership. We anticipate,
as a result of this agreement, receiving payments from third-party partners,
including milestone payments, royalties and reimbursement payments, that may
partially offset the research funding being paid to Biosite.

   Sangamo.  In January 2002, we entered into an agreement with Sangamo
BioSciences, Inc. to create cell lines with the ability to express antibodies
at enhanced levels, using Sangamo's zinc finger DNA binding protein gene
regulation technology platform.

Our Human Antibody Technology

   Technology Platform.  Our solution to making antibodies with fully human
protein sequences is to use transgenic strains of mice in which mouse antibody
gene expression is suppressed and effectively replaced with human antibody gene
expression. Our human antibody technology includes (i) our HuMAb-Mouse
technology, (ii) Kirin's TC Mouse technology, and (iii) the KM-Mouse
technology, a crossbred mouse that combines the characteristics of our
HuMAb-Mouse with Kirin's TC Mouse. In total these technologies constitute our
UltiMAb Human Antibody Development System, and we believe they offer the
broadest and most powerful set of human antibody technologies in the industry.

   Our HuMAb-Mouse Technology.  In these transgenic mice, the mouse genes for
creating antibodies have been inactivated and replaced by human antibody genes.
Our HuMAb-Mouse transgenic strains contain key gene sequences from unrearranged
human antibody genes that code for both the heavy and light chains of human

                                      11

<PAGE>

antibodies. Because genes determine what proteins are made, our transgenic mice
make human antibody proteins. We have thus created mice that have the ability
to make fully human monoclonal antibodies. This result avoids the need to
humanize murine monoclonal antibodies, and because the human genes in our
HuMAb-Mouse are stable, they are passed on to offspring of the mice. Mice can,
therefore, be bred indefinitely at relatively low cost and without additional
genetic engineering. Our HuMAb-Mouse can generate fully human antibodies with
affinities in the picomolar range, as high as 10/12. /

   Kirin's TC Mouse Technology.  Through an exclusive partnership with the
pharmaceutical division of Kirin Brewery Co., Ltd., we have access to the Kirin
TC Mouse. Kirin has developed mice that contain complete sets of the variable
and constant genes found in the corresponding natural human immunoglobulin
loci. These mice are "transchromosomic," meaning that the mouse genes for
creating antibodies have been inactivated and have been replaced by the human
chromosomes containing all of the human antibody genes, including all heavy
chain classes that encode all isotypes (IgG1-4, IgA1-2, IgD, IgM and IgE). The
TC Mouse also has the ability to make fully human monoclonal antibodies. We
have entered into a binding letter of intent to acquire access to this
technology under which Kirin was granted certain rights to use our HuMAb
technology and paid us an upfront fee of $12 million.

   The KM-Mouse.  Together with our partner, Kirin, we have developed the
KM-Mouse, a crossbred mouse that combines the characteristics of our
HuMAb-Mouse with Kirin's TC Mouse that retains the capability to produce all
human antibody isotypes with an immune response we believe previously unseen in
any human antibody producing mouse system.

   Trans-Phage Technology.  To enhance our ability to create products from
genomics research, we have also coupled the UltiMAb Human Antibody Development
System with Biosite's Omniclonal phage display technology. We believe the
result of this combination, referred to as Trans-Phage Technology, is a high
throughput method for generating large volumes of human antibody fragments,
which can then be used to help "validate" new target opportunities, i.e., to
determine which targets are most appropriate for therapeutic antibody
development.

   The UltiMAb Advantage.  Our unique technology platform constitutes what we
believe to be the most complete technology solution available in the
marketplace for generating fully human antibodies, and enables us to produce
antibodies that we believe set the industry standard in that they are (i) 100%
human, (ii) of a very high affinity, and (iii) can be produced and manufactured
quickly and efficiently.

   We believe that our human antibody technologies offer the following
advantages:

   .   Fully Human Antibodies.  Unlike humanization techniques, our UltiMAb
       Human Antibody Development System generates antibodies with 100% human
       protein sequences, which we believe will permit the development of
       products with a favorable safety profile. Additionally, fully human
       antibody-based products are likely to be eliminated less rapidly from
       the human body, potentially reducing the frequency and amount of dosing.

   .   High Affinity Antibodies.  Our human antibody technology takes advantage
       of the human body's natural affinity maturation process (whereby
       antibodies evolve over time to have higher affinity to targets),
       creating antibodies that can have affinities one hundred to one thousand
       times higher than the chimeric or humanized antibodies now approved for
       sale in the United States. Our high affinity antibodies have been
       generated against a wide range of target antigens, and antibody product
       candidates have been generated in as little as three to six months. Our
       human antibodies are produced without the need for any subsequent
       engineering to make them more human--a process that at times has proven
       to be challenging and time consuming. Thus, we reduce the risk that an
       antibody's structure and function will be altered between the time of
       the selection of the initial antibody and the time the final version of
       the antibody is placed into production.

                                      12

<PAGE>

   .   Rapid Development Capabilities.  By combining our technology for
       creating fully human antibodies with our in-house development and
       clinical supply manufacturing expertise, we believe that we can rapidly
       progress from immunizations to the clinic.

   .   Diverse Selection of Antibodies Responding to Many Disease Targets.  We
       believe that our technology has the potential to generate high affinity
       human antibodies of all isotypes and subclasses that recognize more
       antigen structures. In addition, we have been able to create large
       panels of monoclonal antibodies to many potentially medically relevant
       antigens. For a given antigen target, the ability to select a product
       candidate from a pool of multiple antibodies could be important in
       selecting the optimal antibody product for development.

   .   Flexibility for Our Partners.  Our human antibody technology can be used
       either in our laboratories or in the laboratories of our partners. This
       provides our partners with the flexibility to incorporate our technology
       into their research and development programs or to contract with us to
       produce the antibodies.

   .   Certainty of Intellectual Property Rights.  We are not aware of any
       licenses required to create fully human antibodies, using our UltiMAb
       technology platform, to a target owned by the user except under patents
       currently owned or licensed by us. In contrast, various entities hold
       patents that may cover the chimerization or humanization of monoclonal
       antibodies. In addition, several companies and academic institutions
       have developed phage libraries for the creation of monoclonal
       antibodies, and a number of companies and academic research centers have
       received patents that may apply to the creation of phage-derived
       monoclonal antibodies.

Our Research and Development of Human Antibodies

   Our product development efforts are supported by our experience in both
generating and developing numerous human antibodies and in manufacturing
clinical supply materials. We believe this experience, together with increased
access to novel therapeutic targets, will allow us to rapidly generate and
develop a large, diverse pipeline of fully human antibody products. We intend
to develop some of these product candidates for our own account and some in
collaboration with other companies, leveraging their respective research and
development resources.

   Our antibody generation resources include highly trained teams of scientists
in our Milpitas, California, Annandale, New Jersey and Bloomsbury, New Jersey
research facilities, working with our UltiMAb Human Antibody Development System
to generate antibodies for our own development and for our partners. These
scientists are experienced in molecular biology, protein chemistry, animal
biology, pharmacology, toxicology and process science/formulation. Other
development resources include in-house medical professionals with product
development expertise in oncology, rheumatology and immunology, and consulting
arrangements with leading academic researchers.

   In addition to our experience in generating antibodies, we have considerable
experience in clinical development and clinical supply antibody manufacturing.
To facilitate the development and commercialization of antibody-based products
for us and for our partners, we have assembled a team of experienced
scientific, production and regulatory personnel. This team operates in
Bloomsbury, New Jersey and in our clinical trial manufacturing facility in
Annandale, New Jersey, which has a capacity of up to approximately 10 kilograms
of monoclonal antibody production per year.

   We are increasing our access to novel therapeutic targets by establishing
collaborations with leading companies that have expertise in genomics and/or
proteomics. We are collaborating with companies that have identified potential
therapeutic targets or have created platforms for the identification of such
targets. We actively seek opportunities to in-license and/or acquire such
targets and intend to develop novel therapeutic products by producing fully
human antibodies that interact with such targets. We expect to enter into
additional collaborations in the future. Along with our collaborative partners,
we plan to share equally all costs of clinical


                                      13

<PAGE>

development and will share equally in the revenues, expenses and any potential
profits associated with the products that are sold commercially. We believe
this allows us to participate in the research and development of substantially
more potential candidates than we could develop on our own if we bore the
entire cost of development.

Research, Development and Manufacturing Facilities

   We lease approximately 45,000 square feet of laboratory, clinical trial
production and office space in a modern facility on a research campus in
Annandale, New Jersey, where we manufacture antibody products for use in
clinical development and clinical trials conducted by us and by certain of our
partners. Our Annandale facility currently has a capacity of up to
approximately 10 kilograms of monoclonal antibody production per year and
operates in all material respects in accordance with current Good Manufacturing
Practices, or cGMP, regulatory requirements. Although we believe that our
existing facility in Annandale is adequate for the production of materials for
clinical trials of our products and for providing the support we offer to our
partners in connection with our human antibody technology, we are implementing
a strategy that contemplates increased developmental capacity and large-scale
clinical production.

   In November 2000, we acquired our Milpitas, California facility for
approximately $14,600. This property is approximately 57,000 square feet and
currently contains an animal facility to house our HuMAb-Mice, as well as
research and development laboratories and office space. We had previously
leased this facility. During 2001, we renovated this facility and expect to
expand this facility in 2002.

   In early 2001, we purchased a facility and adjacent land in Bloomsbury, New
Jersey. The Bloomsbury facility is situated on approximately 106 acres of land
and currently contains space for approximately 165,000 square feet of
laboratory and office space. We completed an initial expansion of our New
Jersey research and development laboratory facilities in Bloomsbury in May 2001
and currently use 75,000 square feet of laboratory and office space. We are
currently contemplating a strategy to expand our manufacturing capabilities. As
part of this expansion plan, we may contract with third-party manufacturers or
may develop products with partners, utilizing their manufacturing capabilities.
We do not currently have the capability to manufacture our products under
development in large commercial quantities and have no experience in
commercial-scale manufacturing.

Our Cross License Agreement With Abgenix

   In 1994, prior to our acquisition of GenPharm International, Inc., Abgenix,
Inc. and related entities brought a lawsuit against GenPharm relating to
intellectual property issues involved in creating transgenic mice capable of
generating fully human antibodies. GenPharm filed counterclaims, and the
litigation was settled in March 1997 upon the execution of a patent
cross-license and settlement agreement. Under the terms of this agreement,
GenPharm granted a license, on a non-exclusive basis, to certain patents,
patent applications, third party licenses and inventions pertaining to the
development and use of certain transgenic rodents, including mice, that produce
fully human antibodies. In exchange for this license, GenPharm received
payments in 1997, and after our acquisition of GenPharm we received payments,
including interest, from Abgenix and its related parties, which totaled
approximately $38.6 million. Neither Abgenix nor any of its related entities
have any further payment obligations to us under the agreement. Neither we nor
GenPharm were required to make any payments to Abgenix or any related entity
under the terms of the agreement. The agreement also provides us with a
non-exclusive license to certain intellectual property held by Abgenix.

Intellectual Property

   Proprietary protection for our products, processes and know-how is important
to our business. Our policy is to file patent applications to protect
technology, inventions, and improvements that we consider important to the
development of our business. We also rely upon trade secrets, know-how and
continuing technological innovation to develop and maintain our competitive
position. We plan to aggressively prosecute and defend our patents and
proprietary technology.

   Currently, we hold a total of 48 issued patents and allowed patent
applications in the United States, and 170 issued patents in foreign countries
with respect to our technology and products.

                                      14

<PAGE>

   Of these, 12 of our issued patents and allowed patent applications in the
United States and 20 of our issued patents in foreign countries, including
European countries, Japan, Korea, Canada and Australia, among others, cover
various aspects of our HuMAb-Mouse technology and products. These patents,
almost all of which are in the same patent family, cover the transgene, the
transgenic mouse, methods of obtaining high affinity antibodies, and
composition of matter claims for high affinity antibodies, among others. These
patents have expiration dates beginning in 2011. We also have more than 55
related pending U.S. and foreign patent applications covering various aspects
of our HuMAb-Mouse technology and products. These include patent applications
covering several of our particular human antibody product candidates, such as
our anti-PSMA and anti-CTLA-4 product candidates.

   Additionally, we hold exclusive and non-exclusive licenses to various
pertinent technologies relating to our HuMAb-Mouse technology. For example,
these technologies include microinjection of transgene DNA, homologous
recombination, chromosome transfer, yeast artificial chromosome transgene
technology and other relevant technologies. We also hold an exclusive license
from The University of California covering aspects of our anti-CTLA-4 human
monoclonal antibody product candidate and from medac covering certain aspects
of our CD30 human antibody product candidate. We hold a co-exclusive license
from Northwest Biotechnology covering aspects of our PSMA human antibody
product candidate.

   In addition to patent coverage for our HuMAb-Mouse technology, 36 of our
patents and allowed patent applications in the United States and 150 of our
patents in foreign countries, including European countries, Japan, Korea,
Canada and Australia among others, cover aspects of our bispecific molecule
technology and bispecific products. These patents have expiration dates from
2007-2018. In addition, we have more than 77 pending United States and foreign
patent applications also covering aspects of our bispecific molecule technology
and bispecific products. In particular, we hold United States and European
patents covering our trigger antibody, which binds to the human CD64 molecule,
as well as bispecific molecules, which incorporate the trigger antibody. We
also hold exclusive and non-exclusive licenses to technologies owned by third
parties relating to certain aspects of our bispecific and human monoclonal
antibody technologies. For example, we hold a license from Chiron Corporation
for its anti-HER-2/neu antibody used in the production of IDM-1, a bispecific
antibody directed against the HER-2/neu receptor. We also hold a license from
Polaroid Corporation covering the proprietary linking technology employed in
many of our bispecific products.

   We own registrations for the trademark Medarex(R) in the United States, the
European Union and Canada, and the marks Putting the Immune System to Work(R)
and HuMAb-Mouse(R) in the United States. We have also filed applications for
the registration of the latter two marks in the European Union and Canada. We
have filed applications for registration of the marks GenPharm(TM), T-12
Development/SM, Trans-Phage TechnologySM, KM-Mouse(TM), UltiMAb(TM) and UltiMAb
Human Antibody Development SystemSM in the United States and the mark
Medarex(TM) in Australia. These applications are pending. /

Regulatory Issues

   General.  The production, distribution and marketing of products employing
our technology, and our research and development activities, are subject to
extensive governmental regulation in the United States and in other countries.
In the United States, our products are regulated both as drugs and as
biological products, and are subject to the Federal Food, Drug, and Cosmetic
Act, as amended, the Public Health Service Act, also as amended, and the
regulations promulgated under these statutes, as well as to other federal,
state, and local statutes and regulations. These laws govern the clinical and
non-clinical testing, manufacture, safety, effectiveness, approval, labeling,
distribution, import, export, storage, record keeping, reporting, advertising
and promotion of our products. Product development and approval within this
regulatory framework, if successful, will take many years and involve the
expenditure of substantial resources. Violations of regulatory requirements at
any stage may result in various adverse consequences, including FDA's delay in
approving or refusal to approve a product. Violations of regulatory
requirements also may result in enforcement actions including withdrawal of
approval, labeling restrictions, seizure of products, fines, injunctions and/or
civil or criminal penalties.

                                      15

<PAGE>

   The following paragraphs provide further information on certain legal and
regulatory issues with a particular potential to affect our operations or the
future marketing of products employing our technology.

   Research, Development, and Product Approval Process.  Research generally
refers to the discovery or identification of potential product candidates,
initial work on new applications of technology and other associated discovery
work. Development generally involves the further evaluation of biological
functions, testing in pre-clinical models, improvement of laboratory scale
production methods, and the performance of other work necessary to optimize
product performance prior to the commencement of clinical testing in humans.

   The research, development, and approval process in the United States is
intensive and rigorous, and generally takes many years. The typical process
required by the FDA before a therapeutic drug or biological product may be
marketed in the United States includes:

   .   preclinical laboratory and animal tests and analysis;

   .   submission to the FDA of an application for an Investigational New Drug
       Application, or IND, which must become effective before human clinical
       trials may commence;

   .   preliminary human clinical studies to evaluate the drug or biologic and
       its manner of use;

   .   adequate and well-controlled human clinical trials to establish (i) for
       a drug, whether it is safe and effective for its intended uses, and (ii)
       for a biological product, whether it is also pure and potent;

   .   FDA review of whether the facility in which the drug or biologic is
       manufactured, processed, packed or held meets standards designed to
       assure the product's continued quality; and

   .   submission of an appropriate product application to the FDA, and
       approval of the application by the FDA.

   During preclinical testing, studies are performed with respect to the
chemical and physical properties of candidate formulations. Biological testing
is typically done in animal models to demonstrate the activity of the compound
against the targeted disease or condition and to assess the apparent effects of
the new product candidate on various organ systems, as well as its relative
therapeutic effectiveness and safety. An IND must be submitted to the FDA and
become effective before studies in humans may commence.

   Clinical trial programs in humans generally follow a three-phase process.
Typically, Phase I studies are conducted in small numbers of healthy volunteers
or, on occasion, in patients afflicted with the target disease, to determine
the metabolic and pharmacological action of the product candidate in humans,
the side effects associated with increasing doses, and, if possible, to gain
early evidence of effectiveness. In Phase II, studies are generally conducted
in larger groups of patients having the target disease or condition in order to
validate the clinical endpoint, and to obtain preliminary data on the
effectiveness of the product candidate and optimal dosing. This phase also
helps determine further the safety profile of the product candidate. In Phase
III, large-scale clinical trials are generally conducted in hundreds of
patients having the target disease or condition to provide sufficient data for
the statistical proof of effectiveness and safety of the product candidate as
required by United States and foreign regulatory agencies.

   In the case of products for cancer and certain other life-threatening
diseases, the initial human testing may be done in patients with the disease
rather than in healthy volunteers. Because these patients are already afflicted
with the target disease or condition, it is possible that such studies will
provide results traditionally obtained in Phase II studies. These studies are
often referred to as "Phase I/II" studies. Notwithstanding the foregoing, even
if patients are used in initial human testing and a Phase I/II study carried
out, the sponsor is still responsible for obtaining all the data usually
obtained in both Phase I and Phase II studies.

   United States law requires that studies conducted to support approval for
product marketing be "adequate and well controlled." In general, this means
that either a placebo or a product already approved for the treatment

                                      16

<PAGE>

of the disease or condition under study must be used as a reference control.
Studies must also be conducted in compliance with good clinical practice, or
GCP, requirements.

   The clinical trial process can take three to ten years or more to complete,
and there can be no assurance that the data collected will be in compliance
with GCP regulations, will demonstrate that the product is safe or effective,
or, in the case of a biologic product, pure and potent as well, or will provide
sufficient data to support FDA approval of the product. The FDA may place
clinical trials on hold at any point in this process if, among other reasons,
it concludes that clinical subjects are being exposed to an unacceptable health
risk. Trials may also be terminated by institutional review boards, who must
review and approve all research involving human subjects. Side effect or
adverse events that are reported during clinical trials can delay, impede, or
prevent marketing authorization. Similarly, adverse events that are reported
after marketing authorization can result in additional limitations being placed
on a product's use and, potentially, withdrawal of the product from the market.
Any adverse event, either before or after marketing authorization, can result
in product liability claims against the Company.

   During the course of, and following the completion of clinical trials, the
data are analyzed to determine whether the trials successfully demonstrated
safety and effectiveness, and whether a product approval application may be
submitted. In the United States, if the product is regulated as a drug, the FDA
Center for Drug Evaluation and Research, or CDER, will require the submission
and approval of a New Drug Application, or NDA, before commercial marketing may
begin. If the product is regulated as a biologic, such as antibodies, the FDA
Center for Biologics Evaluation and Research, or CBER, will require the
submission and approval of a Biologic License Application, or BLA, before
commercial marketing may begin. The NDA or BLA must include a substantial
amount of data and other information concerning the safety and effectiveness
(and, in the case of a biologic, purity or potency) of the compound from
laboratory, animal and clinical testing, as well as data and information on
manufacturing, product stability, and proposed product labeling.

   Each domestic and foreign biopharmaceutical manufacturing establishment,
including any contract manufacturers we may decide to use, must be listed in
the NDA or BLA and must be registered with the FDA. The application will not be
approved until the FDA conducts a manufacturing inspection, approves the
applicable manufacturing process for the drug or biological product, and
determines that the facility is in compliance with current good manufacturing
practice, or cGMP, requirements. If the manufacturing facilities and processes
fail to pass the FDA inspection, we will not receive approval to market these
products.

   Under the Prescription Drug User Fee Act, as amended, the FDA receives fees
for reviewing a BLA or NDA and supplements thereto, as well as annual fees for
commercial manufacturing establishments and for approved products. These fees
can be significant. The NDA or BLA review fee alone can exceed $270,000,
although certain deferrals, waivers and reductions may be available. Even when
user fees are significant, they do not generally constitute a major expense
relative to the overall cost associated with product development and regulatory
approval. The user fee law is set to expire in 2002, and may or may not be
reauthorized or changed in material ways.

   Under applicable laws and FDA regulations, each NDA or BLA submitted for FDA
approval is usually reviewed for administrative completeness and reviewability
within 45 to 60 days following submission of the application. If deemed
complete, the FDA will "file" the NDA or BLA, thereby triggering substantive
review of the application. The FDA can refuse to file any NDA or BLA that it
deems incomplete or not properly reviewable. If the FDA refuses to file an
application, the FDA will retain 25% percent of the user fee as a penalty. The
FDA has established performance goals for the review of NDAs and BLAs -- six
months for priority applications and ten months for regular applications.
However, the FDA is not legally required to complete its review within these
periods. Moreover, the outcome of the review, even if generally favorable,
typically is not an actual approval but an "action letter" that describes
additional work that must be done before the application can be approved. The
FDA's review of an application may involve review and recommendations by an
independent FDA advisory committee. Even if the FDA approves a product, it may
limit the approved

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therapeutic uses for the product as described in the product labeling, require
that warning statements be included in the product labeling, require that
additional studies be conducted following approval as a condition of the
approval, or otherwise limit the scope of any approval.

   Significant legal and regulatory requirements also apply after FDA approval
to market under an NDA or BLA. These include, among other things, requirements
related to adverse event and other reporting, product advertising and
promotion, and ongoing adherence to cGMPs, as well as the need to submit
appropriate new or supplemental applications and obtain FDA approval for
certain changes to the approved product, product labeling or manufacturing
process. The FDA also enforces the requirements of the Prescription Drug
Marketing Act, or PDMA, which, among other things, imposes various requirements
in connection with the distribution of product samples to physicians.

   Overall research, development and approval times depend on a number of
factors, including the period of review at the FDA, the number of questions
posed by the FDA during review, how long it takes to respond to the FDA
questions, the severity or life-threatening nature of the disease in question,
the availability of alternative treatments, the availability of clinical
investigators and eligible patients, the rate of enrollment of patients in
clinical trials and the risks and benefits demonstrated in the clinical trials.

   Currently, a number of products employing our antibody technology have
entered into clinical trials. MDX-33 has undergone a Phase II clinical study
for idiopathic thrombocytopenia purpura. We are conducting Phase I/II clinical
trials of MDX-010 for the treatment of prostate cancer, malignant melanoma and
two melanoma vaccines. A Phase I clinical trial of MDX-44 for the treatment of
atopic dermatitis was completed in 2001. IDM-1, which is being developed by
IDM, has entered into Phase III clinical trials for the treatment of ovarian
cancer. HuMax-CD4, which is being developed by Genmab, has entered into Phase
III and Phase II clinical trials for the treatment of rheumatoid arthritis and
Phase II trials for the treatment of psoriasis. HuMax-IL15, also being
developed by Genmab, has entered into Phase I/II clinical trials for the
treatment of rheumatoid arthritis. Centocor is developing an antibody product
for the treatment of inflammation that is in Phase I clinical trials. No
products employing our human antibody technology have been approved by the FDA
for sale.

   Treatment IND Status.  Treatment INDs are used to make new drugs and
biologic products available to desperately ill patients as early in the drug
development process as possible, before general marketing is approved and
begins. The FDA may allow an investigational drug to be used under a treatment
IND if there is preliminary evidence of the drug's efficacy and the drug is
intended to treat a serious or life-threatening disease for which no comparable
or satisfactory alternative therapy exists. We or our collaborative partners
may be able to recover some of the costs of production, manufacture, research,
development and handling prior to market approval if patients are allowed to be
charged for the product used in such studies. There are specific conditions
that must be met before a sponsor may charge for an investigational product,
including notifying the FDA in writing in advance. The FDA may notify the
sponsor that it is not authorized to charge for the product.

   Drugs and Biologics for Serious or Life-Threatening Illnesses.  The Federal
Food, Drug and Cosmetic Act, as amended, and FDA regulations provide certain
mechanisms for the accelerated "Fast Track" approval of products intended to
treat serious or life-threatening illnesses which have been studied for safety
and effectiveness and which demonstrate the potential to address unmet medical
needs. The procedures permit early consultation and commitment from the FDA
regarding the preclinical and clinical studies necessary to gain marketing
approval. Provisions of this regulatory framework also permit, in certain
cases, NDAs or BLAs to be approved on the basis of valid surrogate markers of
product effectiveness, thus accelerating the normal approval process. Certain
products employing our human antibody technology might qualify for this
accelerated regulatory procedure. However, we cannot make assurances that the
FDA will agree, and, even if the FDA agrees that these products qualify for
accelerated approval procedures, FDA may deny approval of our drugs or may
require that additional studies be required before approval. The FDA may also
require us to perform post-approval, or Phase IV, studies as a condition of
such early approval. In addition, the FDA may impose

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restrictions on distribution and/or promotion in connection with any
accelerated approval, and may withdraw approval if post-approval studies do not
confirm the intended clinical benefit or safety of the product.

   Other U.S. Regulatory Requirements.

   In the United States, the research, manufacturing, distribution, sale, and
promotion of drug and biological products are potentially subject to regulation
by various federal, state and local authorities in addition to the FDA,
including the Centers for Medicare and Medicaid Services (formerly the Health
Care Financing Administration), other divisions of the U.S. Department of
Health and Human Services (e.g., the Office of Inspector General), and state
and local governments. For example, sales, marketing and scientific/educational
grant programs must comply with the Medicare-Medicaid Anti-Fraud and Abuse Act,
as amended, the False Claims Act, also as amended, and similar state laws.
Pricing and rebate programs must comply with the Medicaid rebate requirements
of the Omnibus Budget Reconciliation Act of 1990, as amended. If products are
made available to authorized users of the Federal Supply Schedule of the
General Services Administration, additional laws and requirements apply. All of
these activities are also potentially subject to federal and state consumer
protection and unfair competition laws.

   Moreover, we are now, and may become subject to, additional federal, state
and local laws, regulations and policies relating to safe working conditions,
laboratory practices, the experimental use of animals, and/or the use, storage,
handling, transportation and disposal of human tissue, waste and hazardous
substances, including radioactive and toxic materials and infectious disease
agents used in conjunction with our research work.

   Foreign Regulatory Requirements.  We and our collaborative partners are
subject to widely varying foreign regulations, which may be quite different
from those of the FDA, governing clinical trials, product registration and
approval, and pharmaceutical sales. Whether or not FDA approval has been
obtained, we must obtain a separate approval for a product by the comparable
regulatory authorities of foreign countries prior to the commencement of
product marketing in these countries. In certain countries, regulatory
authorities also establish pricing and reimbursement criteria. The approval
process varies from country to country, and the time may be longer or shorter
than that required for FDA approval. In addition, under current United States
law, there are significant restrictions on the export of products not approved
by the FDA, depending on the country involved and the status of the product in
that country. We intend, to the extent possible, to rely on foreign licensees
to obtain regulatory approval for marketing products employing our technology
in foreign countries.

Competition

   We face competition in several different forms. Our human antibody
development activities currently face competition from several competitors and
from other technologies. In addition, the actual products being developed by us
or by our collaborators also face actual and potential competition.

   We face competition from many companies that provide the services of
generating antibody-based therapeutics. One competitor with respect to our
human antibody technology is Abgenix. As a result of the cross licensing
agreement with GenPharm, Abgenix offers to potential partners the use of its
transgenic mouse known as XenoMouse(TM), that, according to Abgenix, is capable
of generating fully human monoclonal antibodies. In addition, we have entered
into agreements with each of Kirin and Genmab, respectively, which grant these
companies licenses to our proprietary technology platform, enabling them to
compete with us in offering antibody generation and development services in
certain markets. Certain of our licensing partners also could compete with us
with respect to the development of certain antibodies. Other companies are also
developing, or have developed technologies for generating human or partially
human antibodies. For example, Xenerex Biosciences (a subsidiary of Avanir
Pharmaceuticals) and XTL Biopharmaceuticals Ltd. have developed technology
that, according to Xenerex and XTL, will allow them to generate fully human
monoclonal antibodies. Several companies are developing, or have developed,
technologies, not involving animal immunization, that result in synthetic
antibodies comprising human antibody sequences. For example, phage and yeast
display

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technology is being used by companies such as Abbott Laboratories, Inc.,
Cambridge Antibody Technology Group plc (or CAT), Dyax Corp. and MorphoSys AG
to develop therapeutic products comprising human antibody sequences. Companies
such as Johnson & Johnson, Medimmune, Inc., Immunex Corporation, IDEC
Pharmaceuticals Corporation, Novartis, Genentech, Inc., Protein Design Labs,
Inc. and Wyeth have generated therapeutic products derived from recombinant DNA
that comprise human antibody components that are currently being marketed.
Numerous additional companies are developing therapeutic products comprising
human antibody components.

   We are aware of several pharmaceutical and biotechnology companies which are
actively engaged in research and development in areas related to antibody
therapy, that have commenced clinical trials of antibody products or have
successfully commercialized antibody products. Some of these companies, such as
ImClone Systems Incorporated, Johnson & Johnson, American Home Products,
Immunex, Abbott Laboratories, Cell Tech Group plc, IDEC Pharmaceuticals,
Abgenix, CAT, MorphoSys AG, Tanox, Inc., Genentech and Protein Design Labs, are
addressing diseases and disease indications that are being targeted by us and
our partners. Many of these companies and institutions, either alone or
together with their partners, have substantially greater financial resources
and larger research and development divisions than we have. In addition, many
of these competitors, either alone or together with their partners, have
substantially greater experience than us in developing products, undertaking
preclinical testing and human clinical trials, obtaining FDA and other
regulatory approvals of products and manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA or EU approval or commercializing products more rapidly than us.

   Other technologies can also be applied to the treatment of the diseases that
we or our corporate partners are pursuing. For example,
immunoconjugates--monoclonal antibodies linked to toxins or radioactive
isotypes--are being developed by others. In addition, the application of
recombinant DNA technology to develop potential products consisting of proteins
(such as growth factors, hormones, enzymes, receptor fragments and fusion
proteins, or cytokines) that do not occur normally in the body, or occur only
in small amounts, has been underway for some time. Included in this group are
interleukins such as IL-2 and IL-11, interferons alpha, beta and gamma, colony
stimulating factors such as G-CSF and GM-CSF, clotting factors, growth
hormones, erythropoeitin, DNAse, tPA, glucocerebrosidase, PDGF, and a number of
other biological response modifiers. Continuing development of conventional new
chemical entities and other drugs by large pharmaceutical companies also
carries with it the potential for discovery of agents for treating disease
indications targeted by drugs that we or our partners are developing.

   The development of biotechnology and pharmaceutical products is a highly
competitive business subject to rapid technological change. We know of many
pharmaceutical and biotechnology companies conducting research or development
on monoclonal antibodies and related fields. Some of these companies have
commenced clinical trials or have successfully commercialized antibody
products. Some of these companies are also pursuing product development efforts
for the same disease areas as we or our partners are pursuing.

Marketing

   Our potential products may be marketed and sold in several possible ways,
depending on the product, including: solely by us, jointly by us and our
collaborative partners, or solely by our licensing partners. We believe that a
small sales force could successfully introduce and detail certain of our
potential products that have concentrated marketplaces. Currently, we have no
such sales force. We may develop our own internal sales force for these
products if they proceed to commercialization.

   We acknowledge that the successful marketing of some of our potential
products is beyond the capabilities of all but the largest pharmaceutical
organizations. For this reason, we, along with our collaborative partners may
license to major pharmaceutical companies individual products serving very
large markets or those that will be widely distributed geographically, if the
products are approved by the FDA.

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Employees

   As of December 31, 2001, we employed 297 persons, of whom 96 hold advanced
degrees. Approximately 239 employees are engaged in research and development
activities. There are 58 employees involved in business development, legal,
finance and other administrative functions. None of our employees is covered by
a collective bargaining agreement. We have entered into employment contracts
and consulting agreements with certain of our executive officers and directors.

   Our success will depend in large part upon our ability to attract and retain
employees. We face competition for employees from other companies, research and
academic institutions, government agencies and other organizations. We believe
we maintain good relations with our employees.

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                                 RISK FACTORS

   This Annual Report contains forward-looking statements within the meaning of
Sections 27A and 21E of the Securities Exchange Act of 1934, as amended,
including statements regarding our expectations, beliefs, intentions, or
strategies regarding the future. Forward-looking statements include, without
limitation, statements in "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business" and elsewhere in
this Annual Report regarding, among other things, uncertainties relating to our
technology; history of operating losses and anticipation of future losses;
uncertainty of product development; need for additional capital and uncertainty
of change; uncertainty of patent and proprietary rights; management of growth,
and risks of acquiring new technologies; uncertainties related to clinical
trials; government regulation and uncertainty of obtaining regulatory approval;
dependence on key personnel; dependence on research collaborators and
scientific advisors; uncertainty of health care reform measures and third-party
reimbursement and risk of product liability. All forward-looking statements
included in this Annual Report are based on information available to us, as of
the date hereof, and we do not assume any obligation to update any such
forward-looking statements. Our actual results may differ materially from the
results discussed in the forward-looking statements. Among the factors that
could cause actual results to differ materially are the factors detailed in
"Risk Factors" below. Accordingly, in addition to the other information in this
Annual Report, the following factors should be considered carefully. References
to our products, business, financial results or financial condition should be
considered to refer to us and our subsidiaries unless the context otherwise
requires.

Our product candidates are in early stages of development.

   Our human antibody technology is a new approach to the generation of
antibody-based therapeutic products. Product candidates employing our human
antibody technology are in early stages of development. Only a limited number
of fully human antibody product candidates employing our human antibody
technology have been generated pursuant to our collaborations. INDs have been
submitted to the FDA for only a subset of these candidates, and clinical trials
have not yet commenced for all of these candidates. Only one of these product
candidates has reached the Phase III clinical trial stage. In addition, we are
not aware of any commercialized fully human monoclonal antibody therapeutic
products that have been generated from any technologies similar to ours.
Product candidates employing our human antibody technology may not advance
beyond the early stages of product development or demonstrate clinical safety
and effectiveness.

   Our human antibody technology may not generate antibodies against all the
antigens to which it is exposed in an efficient and timely manner, if at all.
If our human antibody technology fails to generate antibody product candidates,
or if we or our partners do not succeed in the development of products
employing our antibody technology, those product candidates may not be approved
or commercialized and our business will suffer.

   Our products are still under development, and no revenues have been
generated from their sale.

   We have entered into corporate partnerships with a number of companies and
are seeking additional alliances that will support the costs of developing our
portfolio of antibody-based product candidates. The success of these products
is dependent upon the efforts of our corporate partners in developing these
products in the future. Neither we nor our corporate partners know if any of
these products will be effective.

Successful development of our products is uncertain.

   Our development of current and future product candidates is subject to the
risks of failure inherent in the development of new pharmaceutical products and
products based on new technologies. These risks include:

   .   delays in product development, clinical testing or manufacturing;

   .   unplanned expenditures in product development, clinical testing or
       manufacturing;


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   .   failure in clinical trials or failure to receive regulatory approvals;

   .   emergence of superior or equivalent products;

   .   inability to manufacture on our own, or through others, product
       candidates on a commercial scale;

   .   inability to market products due to third-party proprietary rights;

   .   election by our collaborative partners not to pursue product development;

   .   failure by our collaborative partners to develop products successfully;
       and

   .   failure to achieve market acceptance.

   Because of these risks, our research and development efforts or those of our
licensing partners may not result in any commercially viable products. To date,
our licensing partners' right to obtain a commercial product license has been
exercised for only 19 product candidates. If a significant portion of these
development efforts is not successfully completed, required regulatory
approvals are not obtained or any approved products are not commercially
successful, our business, financial condition and results of operations may be
materially harmed.

   Because we and our collaborative partners have not begun commercial sales of
our products, our revenue and profit potential are unproven and our limited
operating history makes it difficult for an investor to evaluate our business
and prospects. Our technology may not result in any meaningful benefits to our
current or potential collaborative partners. Further, due to our limited
operating history, we have difficulty accurately forecasting our revenue. Our
business and prospects should be considered in light of the heightened risks
and unexpected expenses and problems we may face as a company in an early stage
of development in a new and rapidly-evolving industry.

We have incurred large operating losses and these losses may continue.

   We have incurred large operating losses and these losses may continue. In
particular, as of December 31, 2001, we had an accumulated deficit of
approximately $125.8 million. Our losses have resulted principally from:

   .   research and development costs relating to the development of our
       technology and antibody product candidates;

   .   costs associated with the establishment of our new laboratory and
       manufacturing facilities and manufacturing of products; and

   .   general and administrative costs relating to our operations.

   We intend to continue to make significant investments in:

   .   research and development;

   .   preclinical testing and clinical trials;

   .   establishing new collaborations;

   .   investing in new technologies; and

   .   expanding of our manufacturing and production capabilities.

   We do not know when or if we or our partners will complete any pending or
future product development efforts, receive regulatory approval or successfully
commercialize any approved products. We may continue to incur substantial
operating losses even if our revenues increase. As a result, we cannot predict
the extent of future losses or the time required for us to achieve
profitability, if at all.

Our operating results may vary significantly from period-to-period.

   Our future revenues and operating results are expected to vary significantly
from period-to-period due to a number of factors. Many of these factors are
outside of our control. These factors include:

   .   the timing of the commencement, completion or termination of
       collaborative agreements;

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   .   the introduction of new products and services by us, our collaborative
       partners or our competitors;

   .   delays in preclinical testing and clinical trials;

   .   changes in regulatory requirements for clinical trials;

   .   costs and expenses associated with preclinical testing and clinical
       trials;

   .   the timing of regulatory approvals, if any;

   .   sales and marketing expenses; and

   .   the amount and timing of operating costs and capital expenditures
       relating to the expansion of our business operations and facilities.

   Period-to-period comparisons of our results of operations may not be relied
upon as an indication of future performance.

   It is possible that in some future periods, our operating results may be
below expectations of analysts and investors. If this happens, the price of our
common stock may decrease.

Clinical trials required for our product candidates are expensive and
time-consuming and their outcome is uncertain.

   The testing of product candidates employing our human antibody technology
must demonstrate that they are safe and effective for use in humans through
preclinical testing and clinical trials in order to be approved for commercial
sale. For biological products, safety, purity and potency must also be
demonstrated. Conducting clinical trials is a lengthy, time-consuming and
expensive process. The length of time may vary substantially according to the
type, complexity, novelty and intended use of the product candidate, and often
can be several years or more. Delays associated with products for which we are
directly conducting preclinical or clinical trials may cause us to incur
additional operating expenses. Moreover, we will continue to be subject to the
preclinical testing and clinical trials of certain product candidates conducted
by our licensees and collaborative partners over which we have no control. The
commencement and rate of completion of clinical trials may be delayed by many
factors, including:

   .   the inability to manufacture sufficient quantities of qualified cGMP
       materials for use in clinical trials;

   .   slower than expected rates of patient recruitment;

   .   the inability to adequately observe patients after treatment;

   .   changes in regulatory requirements for clinical trials;

   .   the lack of effectiveness during the clinical trials;

   .   unforeseen safety issues; and

   .   government or regulatory delays.

   Even if we obtain positive results from preclinical or clinical trials, we
may not achieve the same success in future trials. Clinical trials may not
demonstrate statistically sufficient safety and effectiveness to obtain the
requisite regulatory approvals for product candidates employing our human
antibody technology. The failure of clinical trials to demonstrate safety and
effectiveness for our desired indications could harm the development of that
product candidate as well as other product candidates, and our business and
results of operations will suffer.

Success in early clinical trials may not be indicative of results obtained in
later trials.

   Results of our early clinical trials and those of our partners' using our
human antibody technology are based on a limited number of patients and may,
upon review, be revised or negated by authorities or by later stage clinical
results. Historically, the results from preclinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs and biologics have shown promising

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<PAGE>

results in clinical trials, but subsequently failed to establish sufficient
safety and effectiveness data to obtain necessary regulatory approvals. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations, which may delay, limit or prevent regulatory approval. In
addition, regulatory delays or rejections may be encountered as a result of
many factors, including changes in regulatory policy during the period of
product development.

Product candidates employing our antibody technology may fail to gain market
acceptance.

   Even if clinical trials demonstrate the safety and efficacy of products
developed by us or our corporate partners using our technology and all
regulatory approvals have been obtained, product candidates employing our
antibody technology may not gain market acceptance among physicians, patients,
third-party payors and the medical community. For example, the current delivery
systems for antibody-based therapeutic products are intravenous and
subcutaneous injection, which are generally less well received by patients than
tablets or capsule delivery. The degree of market acceptance of any product
candidates employing our technology will depend on a number of factors,
including:

   .   establishment and demonstration of clinical efficacy, potency and
       safety, especially as compared to conventional treatments;

   .   cost-effectiveness;

   .   alternative treatment methods;

   .   reimbursement policies of government and third-party payors; and

   .   marketing and distribution support for our product candidates.

   In addition, many of our activities involve genetic engineering in animals
and animal testing. These types of activities have been the subject of
controversy and adverse publicity. Animal rights groups and various other
organizations and individuals have attempted to stop genetic engineering
activities and animal testing by lobbying for legislation and regulation in
these areas.

   If products employing our technology do not achieve significant market
acceptance, our business will suffer.

The successful commercialization of our antibody products will depend on
obtaining coverage and reimbursement for use of these products from third-party
payors.

   Sales of pharmaceutical products largely depend on the reimbursement of
patients' medical expenses by government health care programs and private
health insurers. Without the financial support of the governments or
third-party payors, the market for products employing our human antibody
technology will be limited. These third-party payors are increasingly
challenging the price and examining the cost effectiveness of medical products
and services. In addition, significant uncertainty exists as to the
reimbursement status of newly approved healthcare products. We may need to
conduct post-marketing studies in order to demonstrate the cost-effectiveness
of our products. Such studies may require us to provide a significant amount of
resources. Our project candidates may not be considered cost-effective.
Third-party payors may not reimburse sales of products employing our human
antibody technology, or enable us or our corporate partners to sell them at
profitable prices.

   Third-party payors control health care costs by limiting both coverage and
the level of reimbursement for new health care products. In the future, the
United States government may institute price controls and further limits on
Medicare and Medicaid spending. Internationally, medical reimbursement systems
vary with differing degrees of regulation. Pricing controls and reimbursement
limitations could affect the payments we receive from sales of products
employing our human antibody technology. These variations could harm our
ability and the ability of our corporate partners to sell products employing
our human antibody technology in commercially acceptable quantities at
profitable prices.

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We have limited manufacturing capabilities.

   To be successful, our therapeutic products must be manufactured in
commercial quantities in compliance with regulatory requirements and at
acceptable costs. While we believe our current facilities are adequate for the
limited production of product candidates for clinical trials, our facilities
are not yet adequate to produce sufficient quantities of any products for
commercial sale.

   We are in the early stages of planning the expansion our own manufacturing
of additional products for our clinical trials and products for commercial
sale, in compliance with cGMPs. Construction schedules for a commercial-scale
manufacturing facility may take longer than expected, and the planned and
actual construction costs of building and qualifying the facility for
regulatory compliance may be higher than expected. The process of manufacturing
antibody products is complex. We have no experience in the commercial-scale
manufacturing of any antibody products. It may take a substantial period of
time to begin producing antibodies in compliance with FDA and other regulations
governing the facility and the manufacturing process. Our manufacturing
operations will be subject to ongoing, periodic scheduled and unannounced
inspections by the FDA and state agencies to ensure compliance with cGMP and
other regulations. If we are unable to establish and maintain a manufacturing
facility or secure third party manufacturing capacity within our planned time
and cost parameters, the development and sales of our products and our
financial performance may be materially harmed.

   We may also encounter problems with the following:

   .   production yields;

   .   quality control and assurance;

   .   shortages of qualified personnel;

   .   compliance with FDA regulations;

   .   production costs; and

   .   development of advanced manufacturing techniques and process controls.

   We are aware of only a limited number of companies on a worldwide basis that
operate manufacturing facilities in which our product candidates can be
manufactured under cGMP regulations, a requirement for all pharmaceutical
products. It would take a substantial period of time for a contract facility
that has not been producing antibodies to begin producing antibodies under cGMP
regulations. We cannot make assurances that we will be able to contract with
any of these companies on acceptable terms or in a timely manner, if at all.

   In addition, we and any third-party manufacturer will be required to
register manufacturing facilities with the FDA and other regulatory
authorities. The facilities will be subject to inspections confirming
compliance with cGMP or other regulations. If we or any of our third-party
manufacturers fail to maintain regulatory compliance, our business, financial
condition and results of operations may be materially harmed and the FDA can
impose regulatory sanctions.

We have no sales or marketing experience.

   We currently have no sales, marketing or distribution capabilities. We may
need to enter into arrangements with third parties to market and sell certain
of our products. We may not be able to enter into marketing and sales
arrangements with others on acceptable terms, if at all. To the extent that we
enter into marketing and sales arrangements with other companies, our revenues,
if any, will depend on the efforts of others. These efforts may not be
successful. We may choose to market some of our products directly through a
sales and marketing force. In order to do this, we will have to develop a sales
and marketing staff and establish distribution capability. Developing a sales
and marketing force would be expensive and time-consuming and could delay any
product launch. If we choose to market any of our products directly but are
unable to successfully implement a marketing and sales force, our business and
operating results will be harmed.

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We are, in part, dependent on our collaborative and licensing partners to
support our business and to develop products employing our human antibody
technology.

   We depend on our collaborative and licensing partners to support our
business and to develop products employing our antibody technology. We
currently, or in the future may, rely on our collaborative and licensing
partners to:

   .   access proprietary antigens for the development of product candidates;

   .   access skills and information that we do not possess;

   .   fund our research and development activities;

   .   manufacture products;

   .   fund and conduct preclinical testing and clinical trials;

   .   seek and obtain regulatory approvals for product candidates; and

   .   commercialize and market future products.

   Our dependence on our collaborative and licensing partners subjects us to a
number of risks, including:

   .   our collaborative and licensing partners have significant discretion
       whether to pursue planned activities;

   .   we cannot control the quantity and nature of the resources our
       collaborative and licensing partners may devote to product candidates;

   .   our collaborators may not develop products employing our antibody
       technology as expected; and

   .   business combinations or significant changes in a collaborative and
       licensing partner's business strategy may adversely affect that
       partner's willingness or ability to continue to pursue these product
       candidates.

   If we do not realize the contemplated benefits from our collaborators, our
business will suffer.

Our existing collaborative and licensing partnerships may not be completed or
may be terminated, and we may not be able to establish additional collaborative
or licensing partnerships.

   We have entered into binding letters of intent or memoranda of understanding
with Eos Biotechnology, Genmab, Kirin, Immusol, Athersys and Regeneron. These
binding letters of intent or memoranda of understanding include the principal
terms of these transactions, which will be incorporated into definitive
agreements. By their terms, these letters of intent and memoranda of
understanding will remain in full force and effect and the parties will operate
in accordance with their terms until such time as definitive agreements are
executed. If we are unable to agree on the terms of a definitive agreement with
respect to one or more of these partners, our business may be harmed.

   Our partners generally have the right to terminate our partnerships at any
time. Lengthy negotiations with potential new partners or disagreements between
us and our partners may lead to delays or termination in the research,
development or commercialization of product candidates. If we are not able to
establish additional collaboration or licensing partnerships on terms that are
favorable to us or if a significant number of our existing corporate
partnerships are terminated and we cannot replace them, we may be required to
increase our internal product development and commercialization efforts. This
would likely:

   .   limit the number of product candidates that we will be able to develop
       and commercialize;

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<PAGE>

   .   significantly increase our need for capital; and

   .   place additional strain on management's time.

   Any of the above may harm our business.

Our goals and/or strategy may conflict with those of our collaborative or
licensing partners.

   We may have goals and/or strategies that may conflict with those of our
partners that could adversely affect our business. For example, our
collaborative or licensing partners may pursue alternative technologies,
including those of our competitors. Disputes may arise with respect to the
ownership of rights to any technology or products developed with any licensing
or collaborative partner. If our partners pursue alternative technologies or
fail to develop or commercialize successfully any product candidate to which
they have obtained rights from us, our business will suffer.

We have a significant minority interest in two entities. There may be conflicts
of interest between us and these entities.

   We currently have an equity interest of approximately 33% in Genmab, which
intends to develop and commercialize a portfolio of fully human antibodies
derived from our human antibody technology. In addition, we have an equity
position in IDM, of approximately 6%. In the event that we exercise certain
warrants held by us to purchase convertible or redeemable bonds of IDM and such
bonds are converted or redeemed, our equity position in IDM would be
approximately 29%, based on the shares currently outstanding. These warrants
are exercisable between September 2002 and September 2010, and such bonds may
be converted or redeemed within six months of such exercise. Each of IDM and
Genmab intends to develop and commercialize a portfolio of antibody-based
products.

   Due to the size of our interest in Genmab, we are currently required to
account for our equity interest in Genmab under the equity method of
accounting, which provides that we must include a portion of Genmab's profits
and losses equal to our percentage equity interest in Genmab in our financial
statements. For the years ended December 31, 1999, 2000 and 2001, our portion
of Genmab's losses were $0, $353,000 and $7,334,000 respectively. Genmab has
stated that it anticipates that it will incur substantial losses as it expands
its research and product development efforts. As Genmab's losses continue to
increase, the aggregate amount of such losses we must include in our financial
statements will also increase.

We are dependent on our key personnel.

   We are highly dependent on the members of our scientific and management
staff. If we are not able to retain any of these persons, our business may
suffer. In particular, we depend on the services of Donald L. Drakeman, our
President and Chief Executive Officer, and Nils Lonberg, Ph.D., Senior Vice
President and Scientific Director. For us to pursue product development,
marketing and commercialization plans, we will need to hire additional
qualified scientific personnel to perform research and development. We will
also need to hire personnel with expertise in clinical testing, government
regulation, manufacturing, marketing and finance. We may not be able to attract
and retain personnel on acceptable terms, given the competition for such
personnel among biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions. If we are not able to
attract and retain qualified personnel, our business will suffer.

We depend on patents and proprietary rights.

   Our success depends in part on our ability to:

   .   protect trade secrets;

   .   operate without infringing upon the proprietary rights of others; and

   .   apply for, obtain, protect and enforce patents.

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   We will be able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
We protect our proprietary position by filing United States and foreign patent
applications related to our proprietary technology, inventions and improvements
that are important to the development of our business. While a number of
patents have been issued in the United States and Europe relating to our human
antibody technology, we may not be able to obtain patent protection in other
countries. Our pending patent applications, those we may file in the future, or
those we may license from third parties, may not result in patents being
issued. The patent position of biotechnology companies involves complex legal
and factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that we own or license from third parties may not provide
sufficient protection against competitors. Also, patent rights may not provide
us with proprietary protection or competitive advantages against competitors
with similar technology. Furthermore, others may independently develop similar
technologies or duplicate any technology that we have developed. The laws of
foreign countries may not protect our intellectual property rights to the same
extent as do the laws of the United States.

   In addition to patents, we rely on trade secrets and proprietary know-how.
We seek protection, in part, through confidentiality and proprietary
information agreements. These agreements may not provide protection or adequate
remedies for our human antibody technology in the event of unauthorized use or
disclosure of confidential and proprietary information, or breach of these
agreements. Furthermore, our trade secrets may otherwise become known to, or be
independently developed by, our competitors.

   Our commercial success depends significantly on our ability to operate
without infringing the patents and other proprietary rights of third parties.
In the event that our technologies may infringe on the patents or violate other
proprietary rights of third parties, we and our corporate partners may be
prevented from pursuing product development, manufacturing or
commercialization. Such a result would harm our business.

The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property disputes are costly and
time-consuming to pursue and their outcome is uncertain.

   If we become involved in any litigation, interference or other judicial or
administrative proceedings, we will incur substantial expense and the efforts
of our technical and management personnel will be diverted. An adverse
determination may subject us to significant liabilities or require us to seek
licenses that may not be available from third parties on commercially favorable
terms, if at all. Therefore, we and our collaborative partners may be
restricted or prevented from manufacturing and selling products employing our
human antibody technology, which would harm our business.

   Even though we have received patents pertaining to the HuMAb-Mouse
technology, this does not mean that we and our permitted licensees of
HuMAb-Mouse technology will have exclusive rights to antibodies against all
targets that are made using this technology, or that we or our licensees will
have the right to make, develop, use or sell such antibodies.

   Our patents covering the HuMAb-Mouse technology include patents that cover
particular human monoclonal antibodies. These patents do not cover all human
antibodies.

   Our patents may not protect against the importation of products, such as
antibodies, made using HuMAb-Mouse technology.

   Moreover, other parties could have blocking patent rights to products made
using HuMAb-Mouse technology, such as antibodies, and their production and
uses, either because of a proprietary position covering the antibody or the
antibody's target. For example, we are aware of certain United States and
European patents held by third parties relating to particular targets for their
human monoclonal antibodies, to human monoclonal antibodies against various
targets and bispecific products, and the manufacture and use of such products.
In

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particular, we are aware of certain United States and foreign patents owned by
a third party that pertain to monoclonal antibodies against CTLA-4 and their
uses. We are also aware of certain United States and foreign patents held by
third parties relating to particular anti-CD4 antibodies, anti-EGFr antibodies,
anti-PSMA antibodies, and anti-heparanase antibodies.

   We are also aware of a United States patent owned by Genentech relating to
the production of recombinant antibodies in host cells. We currently produce
certain of our products and our partners' products using recombinant antibodies
from host cells and may choose to produce additional products in this manner.
If any of our antibody products are produced in the manner claimed in this
patent, then we may need to obtain a license, should one be available. If we
are unable to obtain a license on commercially reasonable terms, we may be
impaired from making recombinant antibodies using Genentech's techniques. In
addition to the Genentech patent, we are also aware of certain United States
patents held by third parties relating to antibody expression in particular
types of host cells which may be relevant to our future manufacturing
techniques.

   If our antibody products (or those antibody products of our partners using
our human antibody technology) or their commercial use or production meet all
of the requirements of any of the claims of the aforementioned patents, or
patents which may issue from the aforementioned patent applications, then we or
our partners may need a license to one or more of these patents. Further, we
are aware of a number of other third party patent applications which, if
granted, with claims as currently drafted, may cover our and our partners'
current or planned activities. We seek to obtain licenses to such patents when,
in our judgment, such licenses are needed. If any licenses are required, there
can be no assurance that we will be able to obtain any such license on
commercially favorable terms, if at all, and if these licenses are not
obtained, we might be prevented from using certain of our technologies for the
generation of our recombinant human antibody products. Our failure to obtain a
license to any technology that we may require may have a material adverse
effect on our business, financial condition and results of operations. We
cannot assure you that our products and/or actions in developing or selling its
recombinant human antibody products will not infringe such patents.

   In general, our patent protection may not prevent others from developing
competitive products using our technology or other technologies. Similarly,
others may obtain patents that could limit our ability and the ability of our
licensees to use, import, manufacture, market or sell products or impair our
competitive position and the competitive position of our licensees.

   We are not the exclusive owner of the technology underlying our HuMAb-Mice.
In March 1997, GenPharm entered into a cross-license and settlement agreement
with Abgenix, Cell Genesys, Inc., Xenotech, L.P. and Japan Tobacco, Inc.,
pursuant to which Abgenix and these entities paid us and GenPharm a total of
approximately $38.6 million during 1997 and 1998. This payment was in exchange
for a non-exclusive license to certain patents, patent applications,
third-party licenses and inventions pertaining to the development and use of
certain transgenic rodents, including mice, that produce fully human antibodies
that are integral to our products and business. These patents, licenses and
inventions form the basis of our HuMAb-Mouse technology. Our business may
suffer from the competition of these entities or if any of these entities
breach the cross-license and settlement agreement.

   We are not the exclusive owner of the technology underlying the TC Mouse or
the KM-Mouse. In December 1999, we entered into a binding letter of intent with
Kirin. Under the terms of this letter of intent, Kirin was designated as the
primary distributor of our HuMAb-Mouse technology in Asia, and we were
designated as the primary distributor of Kirin's TC Mouse outside of Asia.
However, Kirin has certain rights to distribute the TC Mouse and the crossbred
mouse throughout the world. We have exchanged broad licenses with Kirin,
subject to milestone and royalty payments, for use of each other's technology
for the development of human antibody therapeutic products. The binding letter
of intent with Kirin includes a license to certain patents, patent
applications, third-party licenses and inventions pertaining to the development
and use of the TC Mouse and the KM-Mouse. Our business may suffer from the
competition of Kirin.

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We may face product liability claims related to the use or misuse of products
employing our antibody technology.

   The administration of drugs to humans, in clinical trials or after
commercialization, may expose us to product liability claims. Consumers,
healthcare producers or persons selling products based on our technology may be
able to bring claims against us based on the use of our products in clinical
trials and the sale of products based on our technology. Product liability
claims may be expensive to defend and may result in large judgments against us.
In November 1998, we voluntarily suspended clinical trials for one of our
products after some patients experienced serious adverse events, or SAEs. As a
result of these SAEs, we have received a small number of claims, of which four
have resulted in lawsuits being filed. All of these lawsuits have been settled
for insubstantial amounts. We currently maintain liability insurance with
specified coverage limits. Although we believe these coverage limits are
adequate, we cannot be certain that the insurance policies will be sufficient
to cover all claims that may be made against us. Product liability insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms. Any claims against us, regardless of their merit, could harm
our business, financial condition and results of operations.

We face intense competition and rapid technological change.

   The development of biotechnology and pharmaceutical products is a highly
competitive business subject to significant and rapid technological change. We
face competition in several different forms. First, our human antibody
development activities currently face competition from several competitors and
from other technologies. The actual products being developed by our
collaborators or by us also face actual and potential competition. Developments
by our competitors may render our human antibody technology obsolete or
non-competitive.

   We are aware of several pharmaceutical and biotechnology companies which are
actively engaged in research and development in areas related to antibody
therapy. Some of these companies have commenced clinical trials of antibody
products or have successfully commercialized antibody products. Many of these
companies are addressing the same diseases and disease indications as we and
our corporate partners. Also, we compete with companies that offer antibody
generation services to companies that have antigens. These competitors have
specific expertise or technology related to antibody development. We compete
directly with Abgenix, with respect to the generation of fully human antibodies
from transgenic mice. In addition, we have entered into agreements with each of
Kirin and Genmab, respectively, which grant these companies licenses to our
proprietary technology platform, enabling them to compete with us in offering
antibody generation and development services in certain markets. Xenerex and
XTL have developed technology that, according to Xenerex and XTL, will allow
them to generate fully human monoclonal antibodies. Numerous additional
companies are developing therapeutic products comprising human antibody
components. Furthermore, several companies are developing, or have developed,
technologies that do not involve immunization of animals for creating synthetic
antibodies comprising human antibody sequence. For example, phage and yeast
display technology is being used by companies, such as Abbott Laboratories,
CAT, Dyax, Genetastic, Inc. and MorphoSys to develop therapeutic products
comprising human antibody sequences. Companies such as Johnson & Johnson,
Medimmune, Immunex, Idec Pharmaceuticals, Novartis, Genentech, Protein Design
Labs and Wyeth have generated therapeutic products derived from recombinant DNA
that comprise human antibody components that are currently being marketed.

   Other technologies can also be applied to the treatment of the diseases that
we or our corporate partners are pursuing. For example,
immunoconjugates--monoclonal antibodies linked to toxins or radioactive
isotypes--are being developed by others. In addition, the application of
recombinant DNA technology to develop potential products consisting of proteins
(such as growth factors, hormones, enzymes, receptor fragments and fusion
proteins, or cytokines) that do not occur normally in the body, or occur only
in small amounts, has been underway for some time. Included in this group are
interleukins such as IL-2 and IL-11, interferons alpha, beta and gamma, colony
stimulating factors such as G-CSF and GM-CSF, clotting factors, growth hormones,

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erythropoeitin, DNAse, tPA, glucocerebrosidase, PDGF, and a number of other
biological response modifiers. Continuing development of conventional new
chemical entities and other drugs by large pharmaceutical companies carries
with it the potential for discovery of agents for treating disease indications
also targeted by drugs that we or our partners are developing.

   Some of our competitors have received regulatory approval or are developing
or testing product candidates that compete directly with product candidates
employing our antibody technology. Many of these companies and institutions,
either alone or together with their corporate partners, have substantially
greater financial resources and larger research and development staffs than we
or some of our corporate partners do. In addition, many of these competitors
have significantly greater experience than we do in:

   .   developing products;

   .   undertaking preclinical testing and clinical trials;

   .   obtaining FDA and other regulatory approvals of products; and

   .   manufacturing and marketing products.

   Accordingly, our competitors may obtain patent protection, receive FDA
approval or commercialize products before we or our corporate partners do. If
we or our corporate partners commence commercial product sales, we or our
corporate partners will be competing against companies with greater marketing
and manufacturing capabilities, areas in which we and certain of our corporate
partners have limited or no experience.

   We also face intense competition from other pharmaceutical and biotechnology
companies to establish corporate partnerships, as well as relationships with
academic and research institutions, and to license proprietary technology.
These competitors, either alone or with their corporate partners, may succeed
in developing technologies or products that are more effective than ours.

If our operating losses are greater than anticipated, we may need substantial
additional funding. We may not be able to obtain sufficient funds to grow our
business or continue our operations.

   We will continue to expend substantial resources for research and
development, including costs associated with developing our antibody technology
and conducting preclinical testing and clinical trials. Our future capital
requirements will depend on:

   .   the size and complexity of research and development programs;

   .   the scope and results of preclinical testing and clinical trials;

   .   the retention of existing and establishment of further corporate
       partnerships, if any;

   .   continued scientific progress in our research and development programs;

   .   the time and expense involved in seeking regulatory approvals;

   .   competing technological and market developments;

   .   the time and expense of filing and prosecuting patent applications and
       enforcing patent claims; and

   .   the cost of establishing manufacturing capabilities, conducting
       commercialization activities and arrangements and in-licensing products.

We may be unable to raise sufficient funds to complete development of any of
our product candidates or to continue operations. As a result, we may face
delay, reduction or elimination of research and development programs or
preclinical or clinical trials, in which case our business will suffer.

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We are subject to extensive and costly government regulation.

   Product candidates employing our human antibody technology are subject to
extensive and rigorous domestic government regulation. The FDA regulates the
research, development, preclinical and clinical testing, manufacture, safety,
effectiveness, record-keeping, reporting, labeling, storage, approval,
advertising, promotion, sale, distribution, import, and export of
biopharmaceutical products. The FDA regulates human antibodies as biologics,
subject to a Biologic License Application, or BLA, under the Public Health
Services Act, as amended. If products employing our human antibody technology
are marketed abroad, they will also be subject to extensive regulation by
foreign governments. Government regulation substantially increases the cost of
researching, developing, manufacturing, and selling our products. The
regulatory review and approval process, which includes preclinical testing and
clinical trials of each product candidate, is lengthy, expensive and uncertain.
We or our corporate partners must obtain regulatory approval for each product
we intend to market, and the manufacturing facilities used for the products
must be inspected and meet legal requirements. Securing regulatory approval
requires the submission of extensive preclinical and clinical data and other
supporting information for each proposed therapeutic indication in order to
establish the product's safety, potency and efficacy for its intended uses. The
approval process takes many years, requires substantial resources, and may
never lead to the approval of a product. Failure to obtain regulatory
approvals, or delays in obtaining regulatory approvals may:

   .   adversely affect the successful commercialization of any drugs that we
       or our corporate partners develop;

   .   impose additional costs on us or our corporate partners;

   .   diminish any competitive advantages that we or our corporate partners
       may attain; and

   .   adversely affect our receipt of revenues or royalties.

   Even if we are able to obtain regulatory approval for a particular product,
the approval may limit the indicated uses for the product, may otherwise limit
our ability to promote, sell, and distribute the product, may require that we
conduct costly post-marketing surveillance, and/or may require that we conduct
ongoing post-marketing studies. Material changes to an approved product, such
as, for example, manufacturing changes or revised labeling, may require further
regulatory review and approval. Once obtained, any approvals may be withdrawn,
including, for example, if there is a later discovery of previously unknown
problems with the product, such as a previously unknown safety issue. If we,
our corporate partners or our contract manufacturers fail to comply with
applicable regulatory requirements at any stage during the regulatory process,
such noncompliance could result in, among other things:

   .   delays in the approval of applications or supplements to approved
       applications;

   .   refusal of a regulatory authority, including the FDA, to review pending
       market approval applications or supplements to approved applications;

   .   warning letters;

   .   fines;

   .   import and/or export restrictions;

   .   product recalls or seizures;

   .   injunctions;

   .   total or partial suspension of production;

   .   civil penalties;

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   .   withdrawals of previously approved marketing applications or licenses;

   .   recommendations by the FDA or other regulatory authorities against
       governmental contracts; and

   .   criminal prosecutions.

   In certain cases, we expect to rely on our corporate partners to file INDs
with the FDA and to direct the regulatory approval process for products
employing our human antibody technology. Our corporate partners may not be able
to conduct clinical testing or obtain necessary approvals from the FDA or other
regulatory authorities for their product candidates employing our human
antibody technology. If they fail to obtain required governmental approvals,
our corporate partners will be delayed or precluded from marketing these
products. As a result, commercial use of products employing our technology will
not occur and our business may be harmed.

We do not have, and may never obtain, the regulatory approvals we need to
market our product candidates.

   To date, we have not applied for or received the regulatory approvals
required for the commercial sale of any of our products in the United States or
in any foreign jurisdiction. None of our product candidates has been determined
to be safe and effective, and we have not submitted a New Drug Application, or
NDA, or BLA, to the FDA or to any foreign regulatory authorities for any of our
product candidates. We have only limited experience in filing and pursuing
applications necessary to obtain regulatory approval, and none of our product
candidates may be approved for marketing.

   Product candidates that appear promising in the early phases of development,
such as in early human clinical trials, may fail to reach the market for a
number of reasons, such as the product candidate did not demonstrate acceptable
clinical trial results even though it demonstrated positive preclinical trial
results; the product candidate was not effective in treating the specified
disease or condition; the product candidate had harmful side effects on humans
or presented unacceptable safety risks; the governing regulatory authorities
(such as FDA) denied approval to the product candidate altogether or denied a
commercially important indicated use; the product candidate was not economical
for us to manufacture; and/or the product candidate was not cost effective in
light of alternative therapies. We cannot guarantee that we will ever be able
to produce commercially successful products.

If we or our manufacturing partners do not obtain or maintain current Good
Manufacturing Practices, we may not be able to commercialize our product
candidates.

   We will depend on our own manufacturing facilities and on those of our
corporate partners and other third parties to manufacture products employing
our human antibody technology. Before commercializing a new drug, manufacturers
must demonstrate compliance with the applicable cGMP regulations which include
quality control and quality assurance requirements as well as the maintenance
of extensive records and documentation. Manufacturing facilities are subject to
ongoing periodic inspection by the FDA and corresponding foreign and state
authorities, including unannounced inspections, and must be licensed before
they can be used in commercial manufacturing for products employing our
technology. In addition, cGMP requirements are constantly evolving, and new or
different requirements may apply in the future. We, our partners or third party
contract manufacturers may not be able to comply with the applicable
regulations. After regulatory approvals are obtained, the subsequent discovery
of previously unknown problems, or the failure to maintain compliance with
existing or new regulatory requirements, may result in restrictions on the
marketing of a product, withdrawal of the product from the market, seizures,
the shutdown of manufacturing facilities, injunctions, monetary fines and/or
civil or criminal sanctions.

Our operations involve hazardous materials and are subject to environmental
controls and regulations.

   As a biopharmaceutical company, we are subject to environmental and safety
laws and regulations, including those governing the use of hazardous materials.
The cost of compliance with health and safety regulations is substantial. Our
business activities involve the controlled use of hazardous materials and we
cannot eliminate the risk of accidental contamination or injury from these
materials. In the event of an accident or environmental discharge, we may be
held liable for any resulting damages, which may exceed our financial resources
and may materially adversely affect our business, financial condition and
results of operations.

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If our license agreements violate the competition provisions of the Treaty of
Rome, then some terms of our key agreements may be unenforceable.

   Certain license agreements that we have entered into or may enter into will
grant or may grant exclusive worldwide licenses of patents, patent applications
and know-how, which are or may be arguably restrictive of competition under
Article 81(1) of the Treaty of Rome. Article 81(1) prohibits agreements which
restrict competition within the European Community and affect trade between
member states. We determine on an agreement-by-agreement basis where an
exemption from the application of Article 81(1) applies to the agreement and,
if it does not, whether to apply to the European Commission for an individual
exemption from the application of Article 81(1). If an exemption is not
applicable and we do not apply for, or are unsuccessful in obtaining, an
exemption from the European Commission, provisions of any license agreement
which are found to be restrictive of competition under Article 81(1), including
those relating to the exclusivity of rights, may be unenforceable and we could
lose the benefit of the rights granted under the provisions.

Our stock price may be volatile.

   There has been significant volatility in the market prices of biotechnology
companies' securities. Various factors and events may have a significant impact
on the market price of our common stock. These factors include:

   .   fluctuations in our operating results;

   .   announcements of technological innovations or new commercial therapeutic
       products by us or our competitors;

   .   published reports by securities analysts;

   .   progress with clinical trials;

   .   governmental regulation;

   .   developments in patent or other proprietary rights;

   .   developments in our relationship with collaborative partners;

   .   public concern as to the safety and effectiveness of our products; and

   .   general market conditions.

   The trading price of our common stock has been, and could continue to be,
subject to wide fluctuations in response to these or other factors, including
the sale or attempted sale of a large amount of our common stock into the
market. Broad market fluctuations may also adversely affect the market price of
our common stock.

We have obligations to issue shares of our common stock in the future, which
may have a dilutive effect on the shares of our common stock currently
outstanding.

   As of March 1, 2002, we have 6,947,741 shares of common stock reserved for
issuance pursuant to options, which have been granted under our stock option
plans having a weighted average exercise price of $17.08 per share. In
addition, there are 1,057,549 shares reserved for issuance pursuant to a
deferred compensation plan. The shares reserved for the deferred compensation
plan will be issued on or after May 2002 over various periods of time during
the next five years. We have filed a registration statement on Form S-8
covering those shares. Shares issued pursuant to this plan, other than shares
issued to affiliates, will be freely tradable in the open market. Shares held
by affiliates may be sold pursuant to the requirements of Rule 144.

   In addition, as of March 1, 2002, we have reserved 1,677,850 shares of
common stock for issuance pursuant to future grants of options under our stock
option plans. We have filed registration statements on Form S-8 covering those
shares. Shares issued under those plans, other than shares issued to
affiliates, will be freely tradable in the open market.

   We also intend, subject to approval by our board of directors, to submit a
proposal to our shareholders at our annual meeting on May 22, 2002 for the
approval of the authorization of up to 3,600,000 new shares of our common stock
allowing for additional options to be granted under our 2001 Stock Option Plan.
If shareholders

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<PAGE>

approve this authorization, we intend to file an amendment to the current
registration statement on Form S-8 covering the shares issuable upon exercise
of shares granted under the 2001 Stock Option Plan to register these additional
shares. Shares issued under the 2001 Stock Option Plan, other than shares
issued to affiliates, will be freely tradable on the open market.

   The exercise of all or a portion of the outstanding options and warrants may
result in a significant increase in the number of shares of our common stock
that will be subject to trading on The Nasdaq National Market, or Nasdaq, and
the issuance and sale of the shares of our common stock upon the exercise
thereof may have an adverse effect on the price of our common stock.

   As of March 1, 2002, we had 6,067,961 shares of common stock reserved for
issuance pursuant to the conversion of $175,000,000 aggregate principal amount
of our 4.50% Convertible Subordinated Notes due 2006. Holders of these notes
may convert their notes into shares of common stock at any time prior to
maturity or their redemption by us at a conversion rate of 34.6789 shares per
each $1,000 principal amount of notes, subject to adjustment.

   Pursuant to our license agreement with Novartis, Novartis may purchase
$2,000,000 of our common stock at a price equal to one hundred and ten percent
of the average of the closing sales prices of our common stock on Nasdaq, on
the twenty consecutive days prior to the fifth anniversary (December 2003) of
the agreement. Additionally, on the sixth anniversary of the agreement,
Novartis may purchase $1,000,000 of our common stock at a price equal to one
hundred and ten percent of the average of the closing sales prices of such
stock on the Nasdaq on the twenty consecutive days prior to such anniversary.

Future sales of our common stock or other securities could cause the market
price of our common stock to decline.

   As of March 1, 2002, we have 72,922,711 shares of common stock outstanding,
of which 2,280,704 are restricted securities as that term is defined in Rule
144 under the Securities Act. Under certain circumstances, these restricted
securities may be sold without registration pursuant to such rule. We are
unable to predict the effect that sales made under Rule 144 or pursuant to any
registration may have on the market price of our common stock. The sale of a
significant number of additional securities, or even the possibility thereof,
may lower the market price of our common stock.

   We have a filed registration statement on Form S-3 under the Securities Act
relating to 3,791,346 shares of common stock that may be offered by one of our
stockholders. These shares of common stock are freely tradable without
restriction or further registration under the Securities Act except for shares
held by our affiliates, which will be subject to resale limitations of Rule 144.

   In addition, we have filed a shelf registration statement on Form S-3 under
the Securities Act relating to the sale of up to $325 million of any of the
following securities:

   .   Debt Securities;

   .   Preferred Stock;

   .   Common Stock; or

   .   Warrants to Purchase Debt Securities, Preferred Stock or Common Stock.

We have a significant amount of debt and may have insufficient cash to satisfy
our debt service obligations. In addition, the amount of our debt could impede
our operations and flexibility.

   We have a significant amount of convertible debt and debt service
obligations, which, unless converted to common shares of the Company, will
mature in 2006. We may be unable to generate sufficient cash flow or

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<PAGE>

otherwise obtain funds necessary to make required payments on our debt. Even if
we are able to meet our debt service obligations, the amount of debt we have
could adversely affect us in a number of ways, including by:

   .   limiting our ability to obtain any necessary financing in the future for
       working capital, capital expenditures, debt service requirements or
       other purposes;

   .   limiting our flexibility in planning for, or reacting to, changes in our
       business;

   .   placing us at a competitive disadvantage relative to our competitors who
       have lower levels of debt;

   .   making us more vulnerable to a downturn in our business or the economy
       generally; and

   .   requiring us to use a substantial portion of our cash to pay principal
       and interest on our debt, instead of applying those funds to other
       purposes such as working capital and capital expenditures.

Upon the occurrence of certain change of control events of our company, we are
required to offer to repurchase all of our debt, which may adversely affect our
business and the price of our common stock.

   Upon the occurrence of certain change of control events of our company, we
are required to offer to repurchase all of our outstanding 4.50% Convertible
Subordinated Notes due 2006. As of March 1, 2002, $175,000,000 aggregate
principal amount of the notes was outstanding. We may pay the repurchase price
in cash or, at our option, in common stock. Such repurchase right may be
triggered at a time at which we do not have sufficient funds available to pay
the repurchase price in cash or determine that payment in cash is otherwise
inadvisable. In such event, the issuance of a significant number of additional
shares of common stock in payment of the repurchase price may lower the market
price of our common stock.

Our restated certificate of incorporation, by-laws, stockholder rights plan and
New Jersey law contain provisions that could delay or prevent an acquisition of
our company.

   In May 2001, our board of directors adopted a stockholder rights plan. The
stockholder rights plan provides for a dividend of one preferred share purchase
right on each outstanding share of our common stock. Each right entitles
stockholders to buy 1/1000/th of a share of our Series A junior participating
preferred stock at an exercise price of $150.00. Each right will become
exercisable following the tenth day after person or group announces an
acquisition of 20% or more of our common stock. We will be entitled to redeem
the rights at $0.001 per right at any time on or before the close of business
on the tenth day following acquisition by a person or group of 20% or more of
our common stock. /

   The stockholder rights plan and certain provisions of our restated
certificate of incorporation and amended and restated by-laws may have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire control of us. This could
limit the price that certain investors might be willing to pay in the future
for our common stock.

   The provisions of our restated certificate of incorporation and by-laws
include:

   .   a classified board of directors;

   .   a requirement that special meetings of shareholders be called only by
       our board of directors, chairman of the board, chief executive officer
       or president;

   .   advance notice requirements for shareholder proposals and nominations;

   .   limitations on the ability of shareholders to amend, alter or repeal our
       by-laws; and

   .   the authority of the board of directors to issue, without shareholder
       approval, preferred stock with such terms as the board of directors may
       determine.

                                      37

<PAGE>

   We are also afforded the protections of the New Jersey Shareholders
Protection Act. This New Jersey statute contains provisions that impose
restrictions on shareholder action to acquire control of our company. The
effect of the provisions of our restated certificate of incorporation and
by-laws and New Jersey law may discourage third parties from acquiring control
of our company.

We do not intend to pay cash dividends on our common stock in the foreseeable
future.

   We intend to retain any future earnings to finance the growth and
development of our business and we do not plan to pay cash dividends on our
common stock in the foreseeable future.

Item 2.  Properties

   We lease approximately 45,000 square feet of laboratory, clinical trial
production and office space in a modern facility on a research campus in
Annandale, New Jersey. The term of the lease expires on September 30, 2008. We
believe that this facility is well suited for clinical-grade production of
monoclonal antibodies, since we have in place most utilities required for
clinical-grade production of such antibodies, including a production unit
designed to meet cGMP standards. This facility has a capacity of up to
approximately 10 kilograms of monoclonal antibody production per year. We
believe that our existing facilities are adequate for the production of
materials for clinical trials of our current products and for providing the
services we currently offer to our corporate partners in connection with our
human antibody technology. In early 2001, we purchased a facility and adjacent
land in Bloomsbury, New Jersey to expand our research and development
capabilities. The Bloomsbury facility is situated on approximately 106 acres of
land and currently contains space for approximately 165,000 square feet of
laboratory and office space. The cost of the Bloomsbury facility including land
and building was $9.2 million. On November 3, 2000, we acquired the Milpitas,
California facility for approximately $14.6 million. We had previously leased
this facility. This space includes an animal facility to house our HuMAb-Mouse,
research and development laboratories and administrative offices. This property
contains approximately 57,000 square feet of laboratory and office space. We
also lease approximately 20,000 square feet of office space in Princeton, New
Jersey for our corporate headquarters. The combined minimum annual lease
commitments for our facilities in 2002 is approximately $1.9 million, and the
aggregate future minimum lease commitments over the remainder of the lease
terms are approximately $10.8 million.

Item 3.  Legal Proceedings

   In the ordinary course of our business, we are at times subject to various
legal proceedings. We do not believe that any of our current legal proceedings,
individually or in the aggregate, will have a material adverse effect on our
operations or financial condition.

   On May 24, 2000, Lexicon Genetics Incorporated filed a complaint against
Deltagen, Inc. in U.S. District Court for the District of Delaware alleging
that Delatgen was willfully infringing the claims of United States Patent No.
5,789,215, under which Lexicon holds an exclusive license in the relevant field
from our wholly-owned subsidiary GenPharm International, Inc. This patent
covers certain methods of engineering the animal genome, including certain
methods for the production of knockout mice.

   On October 31, 2000, Lexicon amended its complaint to add GenPharm, as the
licensor of the patent, as a plaintiff. On November 14, 2000, Deltagen filed an
answer to Lexicon's amended complaint which included counterclaims against
Lexicon and, for the first time, counterclaims against GenPharm. In its
counterclaims, Deltagen sought declaratory relief that the patent was invalid,
unenforceable and not infringed. In addition, Deltagen asserted counterclaims
against both Lexicon and GenPharm under the antitrust laws. Deltagen sought,
among other relief, an award of monetary damages against Lexicon and GenPharm
in an unspecified amount.

   On September 24, 2001, the litigation against GenPharm was dismissed with
prejudice pursuant to a stipulation following a settlement of the underlying
dispute between Lexicon and Deltagen.

                                      38

<PAGE>

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

   There were no matters submitted to a vote of security holders during the
last quarter of the fiscal year ended December 31, 2001 through the
solicitation of proxies or otherwise.

                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters

   Our common stock is listed on the Nasdaq National Market under the symbol
"MEDX." The following table sets forth the high and low sale prices per share
of common stock, as reported on the Nasdaq National Market, during the periods
indicated.

<TABLE>
<CAPTION>
                                                Common Stock
                                                   Price*
                                               --------------
                                                High    Low
                                               ------- ------
                  <S>                          <C>     <C>
                  Year ended December 31, 2000
                     First Quarter............ $103.00 $14.19
                     Second Quarter........... $ 44.44 $16.63
                     Third Quarter............ $ 59.94 $35.69
                     Fourth Quarter........... $ 75.00 $30.06

                  Year ended December 31, 2001
                     First Quarter............ $ 42.50 $12.06
                     Second Quarter........... $ 32.25 $11.75
                     Third Quarter............ $ 24.47 $11.91
                     Fourth Quarter........... $ 25.05 $14.25
</TABLE>

--------
* All prices have been adjusted to reflect a two-for-one stock split as of
September 27, 2000.

   The number of shares of our common stock outstanding as of March 15, 2002
was 72,922,711. As of such date, there were approximately 433 record holders of
common stock (which includes individual holders) and as of May 23, 2001, the
date of the last shareholders' meeting, there were approximately 23,650
beneficial shareholders of our common stock.

   We currently expect to retain our future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.


                                      39

<PAGE>

Item 6.  Selected Consolidated Financial Data

<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                            ----------------------------------------------------
                                                              1997      1998       1999        2000      2001
                                                            --------  ---------  ---------  ---------- ---------
                                                                    (in thousands, except per share data)
                                                                                            (Restated)
<S>                                                         <C>       <C>        <C>        <C>        <C>
Statement of Operations Data:
Revenues:
   Sales................................................... $    221  $   1,349  $   1,079  $     264  $     191
   Contract and license revenues...........................    3,011      5,443      8,593     19,619     37,140
   Sales, contract and license revenues from Genmab........       --         --        252      2,574      4,973
                                                            --------  ---------  ---------  ---------  ---------
      Total revenues.......................................    3,232      6,792      9,924     22,457     42,304
Costs and expenses:
   Cost of sales...........................................      150      1,218        709      1,189        642
   Research and development................................   14,100     23,122     19,929     33,942     38,626
   General and administrative..............................    3,644      5,065      8,036     18,142     19,344
   Stock bonus to GenPharm employees.......................    2,275         --         --         --         --
   Acquisition of in-process technology....................   40,316         --         --         --         --
                                                            --------  ---------  ---------  ---------  ---------
      Total costs and expenses.............................   60,485     29,405     28,674     53,273     58,612
                                                            --------  ---------  ---------  ---------  ---------
       Operating loss......................................  (57,254)   (22,613)   (18,750)   (30,816)   (16,308)
   Equity in net loss of affiliate.........................       --         --         --       (353)    (7,334)
   Interest and dividend income............................    1,903      1,956      1,205     21,158     24,728
   Interest expense........................................      (27)    (1,539)        (8)        (3)    (4,615)
   Gain on disposition of Genmab stock.....................       --         --         --         --      1,442
                                                            --------  ---------  ---------  ---------  ---------
      Loss before provision (benefit) for income taxes.....  (55,377)   (22,196)   (17,553)   (10,014)    (2,087)
   Provision (benefit) for income taxes....................       --        341       (522)   (13,075)       600
                                                            --------  ---------  ---------  ---------  ---------
       Net income (loss)................................... $(55,377) $  22,537) $ (17,031) $   3,061  $  (2,687)
                                                            ========  =========  =========  =========  =========
Basic net income (loss) per share (1)...................... $  (1.47) $   (0.44) $   (0.27) $    0.04  $   (0.04)
                                                            --------  ---------  ---------  ---------  ---------
Diluted net income (loss) per share (1).................... $  (1.47) $   (0.44) $   (0.27) $    0.04  $   (0.04)
                                                            --------  ---------  ---------  ---------  ---------
Weighted average commonshares outstanding (1)..............
  --basic..................................................   37,742     50,780     63,840     71,532     73,937
  --diluted................................................   37,742     50,780     63,840     73,232     73,937

                                                                                December 31,
                                                            ----------------------------------------------------
                                                              1997      1998       1999        2000      2001
                                                            --------  ---------  ---------  ---------- ---------
                                                                               (in thousands)
                                                                                            (Restated)
Balance Sheet Data:
Cash, cash equivalents and marketable securities........... $ 28,444  $  34,664  $  30,147  $ 343,603  $ 466,952
Working capital............................................    1,647     29,581     22,382    329,807    447,326
Total assets...............................................   48,695     42,235     40,482    558,107    720,427
Long term obligations......................................      107         62         23         --    175,000
Cash dividends declared per common share...................       --         --         --         --         --
Accumulated deficit........................................  (86,869)  (109,405)  (126,436)  (123,375)  (126,062)
Total shareholders' equity.................................    5,681     35,229     22,299    485,289    482,562
</TABLE>
--------
(1) Computed on the basis described in Note 2 to the Consolidated Financial
    Statements.

                                      40

<PAGE>

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

   The following discussion should be read together with our consolidated
financial statements and the accompanying notes included elsewhere in this
Annual Report and contains trend analysis and other forward-looking statements
that involve substantial risks and uncertainties. Our actual results could
differ materially from those expressed or implied in these forward-looking
statements as a result of various factors.

   Dollars reported in thousands, except per share data.

Basis of Financial Statement Presentation

   We are a biopharmaceutical company focused on the discovery and development
of human antibody-based therapeutic products using our proprietary technology
platform, the UltiMAb Human Antibody Development System. This unique
combination of human antibody technologies enables us to rapidly create and
develop high affinity, fully human antibodies to a wide range of potential
disease targets for therapeutic antibody products, including products for the
treatment and/or diagnosis of cancer, inflammation, auto-immune and other life-
threatening and debilitating diseases.

   Through our 1997 acquisition of GenPharm International, Inc. and our
collaboration with Kirin Brewery Co. Ltd., we expanded our business to include
both our HuMAb-Mouse and Kirin's TC Mouse technologies. In December 2000 we
unveiled the KM-Mouse, a unique crossbred mouse developed in partnership with
Kirin, as the newest addition to our UltiMAb Human Antibody Development System.
With the UltiMAb platform, we have assembled a unique family of human antibody
technologies for creating the entire spectrum of high-affinity, fully human
antibodies. We intend to leverage our product development capabilities with
those of our partners, while also gaining access to novel therapeutic targets
and complementary development, sales and marketing infrastructure. As of March
1, 2002, 41 pharmaceutical and biotechnology companies have partnered with us
to jointly develop and commercialize products or have otherwise acquired the
rights to use our proprietary technology in their development of new products,
including industry leaders such as Amgen, Inc., Centocor, Inc. (a subsidiary of
Johnson & Johnson), Eli Lilly & Company, Human Genome Sciences, Inc., Immunex
Corporation, Novartis Pharma AG, Novo Nordisk A/S, and Schering AG. Some of
these are licensing partnerships, providing us with licensing fees, milestone
payments and royalty payments; others are collaborative partnerships and
provide for the sharing of product development costs, revenues, expenses and
profits associated with products sold commercially.

   Our licensing partners typically obtain licenses to one or more of our
antibody generating technologies which allow these partners to develop and
commercialize antibody-based products. We could receive license fees,
milestones and royalties in connection with each of these products. Under these
licenses, there is usually an initial period during which our corporate partner
may elect to enter into a research license for antibodies to a particular
designated target. Subsequently, our licensing partner may elect to obtain a
commercial license for monoclonal antibodies to a particular target. As of
December 31, 2001, 21 of our total partnerships were licensing partnerships,
and we expect to continue adding additional licensing partnerships in the
future.

   We are also pursuing an "Applied Genomics" strategy in order to gain access
to new target antigens as they are identified, while also sharing the risks and
rewards of the related antibody development and commercialization. To this end,
we have established a number of collaborative partnerships with leading
companies in the fields of genomics and proteomics to jointly develop and
commercialize human antibody products. Typically, our collaborator will provide
a target antigen, and we will generate antibodies against that antigen using
our UltiMAb Human Antibody Development System. We and our collaborators
typically agree to share equally costs of clinical development and
manufacturing as well as revenues, expenses and profits associated with the
products. As of December 31, 2001, 18 of our total partnerships were
collaborative partnerships, and we expect to continue adding additional
collaborations in the future.

                                      41

<PAGE>

   Revenue--Our revenue is principally derived through licensing our human
antibody technology to pharmaceutical and biotechnology companies. The terms of
these agreements typically include potential license fees and a series of
milestone payments commencing upon initiation of clinical trials and continuing
through commercialization. These payments may total $7,000 to $10,000 per
product if the antibody receives approval from the FDA and equivalent foreign
agencies. We are also entitled to royalties on product sales. Additional
revenue is earned from the sales and, in some cases, manufacturing, of
antibodies to corporate partners and from government grants.

   Research and Development Expenses--Research and development expenses consist
primarily of compensation expense, facilities, preclinical and clinical trials
and supply expense relating to antibody product development and to the
breeding, caring for and continued development of our HuMAb-Mouse and KM-Mouse,
as well as to the performance of contract services for our collaborative
partners.

   General and Administrative Expenses--General and administrative expenses
consist primarily of compensation, facility, travel, legal fees and other
expenses relating to our general management, financial, administrative and
business development activities.

Critical Accounting Policies

   The methods, estimates and judgments we use in applying our most critical
accounting policies have a significant impact on the results we report in our
consolidated financial statements.We evaluate our estimates and judgments on an
on-going basis. We base our estimates on historical experience and on
assumptions that we believe to be reasonable under the circumstances. Our
experience and assumptions form the basis for our judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may vary from what we anticipate and different
assumptions or estimates about the future could change our reported results. We
believe the following accounting policies are the most critical to us, in that
they are important to the portrayal of our financial statements and they
require our most difficult, subjective or complex judgments in the preparation
of our consolidated financial statements:

Revenue Recognition

   Historically, a significant portion of our revenue has been recognized
pursuant to collaboration and license agreements with our partners. Revenue is
recognized as research services are performed over the related funding periods
for each agreement. Deferred revenue may result when we do not expend the
required level of effort during a specific period in comparison to funds
received under the respective agreements or when funds received are refundable
under certain circumstances. Milestone and royalty payments are recognized as
revenue upon achievement of specific milestones. Non-refundable upfront
payments received in connection with our collaborative partnerships are
deferred and recognized as revenue on a straight-line basis over the relevant
periods of the respective agreements.

Investments

   All marketable securities are classified as available-for-sale securities
and are carried at fair value. Marketable securities will include those
securities of debt and publicly traded equity securities accounted for under
the cost method. These securities trade on listed exchanges; therefore, fair
value is readily available. These securities are also subject to impairment
charge when we believe an investment has experienced a decline in value that is
other than temporary.

   In addition, we make strategic investments in the equity of companies that
are privately held, and these securities are carried at original investment
cost. Because these securities are not listed on a financial exchange,

                                      42

<PAGE>

we value of these investments by using information acquired from industry
trends, the management of these companies, financial statements, and other
external sources. Based on the information, acquired through these sources, we
record an investment impairment charge when we believe an investment has
experienced a decline in value that is other than temporary. Future adverse
changes in market conditions or adverse changes in operating results of
underlying investments that may not be reflected in an investment's current
carrying value, may also require an impairment charge in the future.

Results of Operations

   Years Ended December 31, 1999, 2000 and 2001

   Revenues for 1999, 2000 and 2001 were principally derived from our contract
and licensing activities. Total revenues in 1999 of $9,924 included a $4,000
milestone payment from Centocor which holds exclusive commercial licenses to
develop HuMAb-Mouse antibodies to four licensed targets. In addition, the 1999
revenue included payments pursuant to license agreements and sales with Merck
KGaA of $3,056. Revenues for 2000 of $22,457 increased by $12,533 or 126% over
1999. The increase relates principally to contract and license revenues of
$6,000 from Kirin, $5,961 from IDM and $3,971 from Scil Biomedicals, offset in
part by 1999 milestone payments from Centocor for certain exclusive commercial
licenses. Revenue for 2001 of $42,304 increased by $19,847, a 88% increase from
2000. The increase relates principally to an increase of $14,341 of contract
and license revenues from IDM and an increase of $2,399 of sales, contract and
license revenues from Genmab.

   Our cost of sales were $1,189 in 2000, an increase of $480, or 68% over
1999. The 2000 increase was due to higher production of HuMax-CD4 that was sold
to Genmab. Cost of sales were $642 in 2001, a decrease of $547, or 46% decrease
compared to 2000 despite comparable sales. The decrease primarily reflects a
lower unit production cost of HuMax-CD4.

   Research and development expenses are largely comprised of personnel costs,
those expenses related to facilities for our clinical research, development and
clinical trial manufacturing efforts, third party research costs and supply
costs. We have incurred research and development expenses for our products in
development of $19,929, $33,942 and $38,626 for the years ended December 31,
1999, 2000 and 2001, respectively. Our total research and development costs
from inception to date are $159,559. Research and development expenses in 2000
increased by $14,013, or 70% over 1999. Research and development expenses in
2001 increased by $4,684, or 14% increase over 2000. The increases relate
primarily to costs associated with the following:

   .   Personnel costs for the year ended December 31, 2000 increased by $2,862
       or 45% over 1999. Personnel costs for the year ended December 31, 2001
       increased by $5,101 or 55% over 2000. The increase in staff is to
       support higher levels of product development and clinical trial
       manufacturing activities, the continued development of our UltiMAb
       system, and the performance of contract services for our collaborative
       partners and clinical activities. Included in the increase are salary,
       benefits, payroll taxes and recruiting costs. We expect personnel costs
       to increase further as we continue to increase our product development
       activities and progress our products in clinical trials.

   .   Facility costs for the year ended December 31, 2000 increased by $434 or
       12% over 1999. Facility costs for the year ended December 31, 2001
       increased by $4,300 or 99% over 2000. The increase in 2001 was due to
       substantial investments in our three research and development
       facilities. Such expenditures included: building and land improvements,
       machinery and lab equipment, furniture and fixtures and other related
       costs. As a result, depreciation, utilities, maintenance, property taxes
       and related expenses increased for the year ended December 31, 2001, as
       compared to the same period in 2000. We expect facility costs to
       increase in future periods as a result of our continued capital
       expansion plans.

   .   Outside funding of research for the year ended December 31, 2000
       increased by $6,534 or 1,084% over 1999. Outside funding of research for
       the year ended December 31, 2001 decreased by $8,326 or 117%

                                      43

<PAGE>

       as compared to 2000. In 2000 we paid a $5,000 upfront fee to Eos
       Biotechnology Inc., under our binding letter of intent. Conversely, the
       2001 decrease was principally due to the April 2001 refund of this
       $5,000 fee by Eos as part of a restructuring of the collaboration. We
       expect outside funding of research expenses, including funds paid to
       certain partners for research services, to increase in the future.

   .   Research supply costs for the year ended December 31, 2000 increased by
       $787 or 33% over 1999. Research supply costs for the year ended December
       31, 2001 increased by $3,996 or 127% over 2000. Included in these costs
       are materials and small equipment associated with the development of our
       products. We expect these costs to increase as we continue to expand our
       research and product development activities.

   We also expect expenses related to clinical trials to increase in the future
as we continue to develop our therapeutic product pipeline. As part of our
partnering strategy, a significant portion of the research and development
expenses incurred in connection with products using our technology is expected
to be borne by our partners. We believe this allows us to participate in the
research and development of substantially more potential product candidates
than we could develop on our own if we bore the entire cost of development.
Products using our technology are currently in various stages of development
from preclinical to Phase III. The successful development of these product
candidates is dependent on many factors, including among other things, the
efforts of our partners, unforeseen delays in, or expenditures relating to,
preclinical development, clinical testing, manufacturing or regulatory
approval, failure to receive market acceptance, the emergence of competitive
products and the inability to produce or market our products due to third-party
proprietary rights.

   General and administrative expenses were $18,142 in 2000, an increase of
$10,106, or 126% over 1999. The increase was primarily attributable to higher
consulting and personnel costs incurred in connection with the expansion of our
business activities and increased shareholder relation expenses. Included in
these expenses are non-cash charges for options issued to employees and options
and warrants issued to consultants of $2,604 and $5,672, respectively. General
and administrative expenses were $19,344 in 2001, an increase of $1,202, or 7%
over 2000. The increase is primarily attributable to an increase in personnel
costs, as well as higher legal and travel costs incurred in connection with the
expansion of our business activities. The increase was partially offset by
lower consulting and shareholder relation expenses. General and administrative
expenses are expected to increase in the future as our products are developed
and we expand our business activities.

   Equity in net loss of affiliate of $353 in 2000 reflects our share of
Genmab's loss for the year ended December 31, 2000. We were not required to
include any of Genmab's losses in 1999. Equity in net loss of affiliate was
$7,334 in 2001, an increase of $6,981 over 2000. The increased loss reflects
our share of Genmab's loss for the full year. This loss is primarily the result
of Genmab's increased activity in research and development and expansion of its
business. Genmab is an affiliated company and is accounted for using the equity
method (see Note 12 to the Consolidated Financial Statements). We expect equity
in net loss of affiliate to increase in the near future due to the Genmab's
proposed increase in research and development costs to develop its product
pipeline.

   Interest and dividend income was $21,158 in 2000, an increase of $19,953, or
1,656% over 1999. The increase reflects interest earned on higher average cash
balances resulting from the proceeds received from the March 3, 2000 follow-on
public offering of our common stock. We sold 4,798,408 shares (split adjusted)
and received net proceeds of approximately $388,100. Interest and dividend
income was $24,728 in 2001, an increase of $3,570, or 17% over 2000. The
increase reflects interest earned on higher average cash balances as the result
of proceeds received from the June 26, 2001 public offering of our 4.50%
convertible subordinated notes due in 2006. We anticipate lower investment
income in the future as we liquidate our investments to fund operations and
capital expenditures.

   Interest expense was $3 in 2000, a decrease of $5, or a 63% decrease from
1999. Interest expense was $4,615 in 2001, an increase of $4,612, as compared
to 2000, which reflects accrued interest on the 4.50% convertible subordinated
notes issued on June 26, 2001 and due in 2006. Interest is payable on January 1
and July 1 of each year beginning January 1, 2002.

                                      44

<PAGE>

   Our benefit for income taxes for the year ended December 31, 1999 of $522,
consisted of $1,434 received from the sale of a portion of our New Jersey net
operating loss, or NOL, carryforwards and research and development tax credits
offset, in part, by a provision for state taxes. Our benefit for income taxes
for the year ended December 31, 2000 of $13,075 was partially due to our
recording of an increased basis of Genmab's assets from its initial public
offering in October 2000. It consisted of $20,274 of deferred tax benefit and
$944 from the sale of New Jersey state NOLs, offset, in part, by provisions for
federal and state taxes and by current and deferred foreign withholding tax
expense. The deferred tax benefit related to deferred tax assets for which no
valuation allowance was necessary because an equivalent amount of deferred tax
liability was established, related to an unrealized gain included in
comprehensive income. The tax benefit is principally derived from Medarex's
portion of the increase in the book value of the assets of Genmab resulting
from the proceeds Genmab received upon completion of its initial public
offering in October 2000. The current federal and state tax provisions for the
year ended December 31, 2000 resulted from revenue that is deferred for
financial reporting purposes but not for tax reporting purposes, and from
limitation of the available federal NOLs. After tax deductions related to
exercises of stock options, no current federal or state taxes were payable at
December 31, 2000. Applicable accounting rules require recognition of tax
benefits associated with these deductions through adjustment to additional
paid-in capital rather than through current tax expense. Our tax expense for
the year ended December 31, 2001 of $600 was the result of deferred foreign tax
assets reversing in the current year. There were no federal or state current
tax benefits for the year ended December 31, 2001.

   We do not believe that inflation has had a material impact on our results of
operations.

Liquidity and Capital Resources

   We have financed our operations since inception primarily through private
placements and public sales of our common stock, the issuance of subordinated
convertible debt, contract and license revenues and research product sales. In
2000 and 2001, we raised a total of $569,990 from sales of our equity and debt
securities.

   At December 31, 2000 and 2001, we had $343,603 and $466,952, respectively,
in cash, cash equivalents and marketable securities. We invest our cash
equivalents and marketable securities in highly liquid, interest-bearing,
investment grade and government securities in order to preserve principal.

   Cash Used in Operating Activities.  Operating activities consumed $5,610,
$14,374, and $7,690 of cash for the years ended December 31, 1999, 2000 and
2001, respectively. We have incurred and will continue to incur significant
costs in the area of research and development, including preclinical and
clinical trials, as our products are developed. As we complete the expansion of
our new research and development facilities, we will incur additional
maintenance costs such as utilities, property taxes and engineering charges.
Moreover, we also plan to spend significant amounts to develop, on a
proprietary or co-developed basis, INDs for as many as ten product candidates a
year. To a lesser extent, we expect our general and administrative costs to
increase as we expand our administrative and business development activities.
Our operating expenditures will only be partially offset by revenues from
partners for license fees, milestone payments, development and manufacturing
services and earnings received on our investments. Going forward, we anticipate
lower investment income due to lower average cash balances, resulting from
planned capital expenditures and the funding of future operating losses.

   Cash Used in Investing Activities.  Net cash used in investing activities
was $322,021 and $208,947 in 2000 and 2001, respectively. Such activities
include equity investments in other companies as well as expenditures for
property, equipment, construction-in-progress and other related costs. It also
includes net purchases of marketable securities with the funds we received from
our follow-on public offering in 2000 and our convertible subordinated notes
issuance in 2001. During 2001, we invested $55,009 in property, buildings and
equipment.

   In November 2000, we acquired the Milpitas, California facility that we had
leased in April 2000 for approximately $14,600. This property contains
approximately 57,000 square feet of laboratory and office space and, as of
December 31, 2001, we had spent (cumulatively) approximately $16,200 on
renovating this facility.

                                      45

<PAGE>

   In January 2001, we purchased a facility and adjacent land in Bloomsbury,
New Jersey for approximately $9,200. The Bloomsbury facility is situated on
approximately 106 acres of land and currently contains space for approximately
165,000 square feet of laboratory and office space. We currently are using
75,000 square feet as laboratory and office space. As of December 31, 2001, we
have completed the initial phase of the Bloomsbury facility and have
cumulatively expended approximately $47,400. In 2002, we expect to expand our
research facility in Milpitas and continue the expansion of laboratory and
development capacity in Bloomsbury and Annandale, New Jersey. We currently
expect the costs for this expansion to be up to approximately $60,000, but this
is subject to change.

   Cash Provided by Financing Activities.  During 2001, net cash provided by
financing activities was $169,509 primarily from the proceeds received from our
June 2001 issuance of 4.5% $175,000 convertible subordinated notes. The notes
bear interest at an annual rate of 4.5% payable on January 1 and July 1 of each
year. The first interest payment was made on January 1, 2002. The notes are
convertible into shares of common stock at a ratio of 34.6789 per each $1,000
principal amount of the notes ($28.84 per share), subject to adjustment. The
cost of issuance of the notes of approximately $5,900 has been deferred and is
being amortized over the term of the notes. Such amortization is included in
interest expense on our Consolidated Statement of Operations for the year ended
December 31, 2001. The notes are subordinated to all existing and future senior
indebtedness. We may redeem any or all of the notes at any time at specified
redemption prices (plus possible "make whole" payments as defined in the
indenture), plus accrued and unpaid interest to the redemption date. The notes
will mature on July 1, 2006 unless earlier converted, redeemed at our option or
redeemed at the option of the noteholder upon a "fundamental change" as
described in the indenture for the notes. In addition, neither we nor any of
our subsidiaries are restricted under the indenture from paying dividends,
incurring debt, or issuing or repurchasing our securities. During 2000, net
cash provided by financing activities was $400,426, received primarily from the
sale of our common stock in a follow-on public offering.

   Net Operating Loss Carryforwards.  As of December 31, 2001, we had federal
net operating loss (NOL) carryforwards of approximately $93,081. These NOL
carryforwards will expire in the years 2002 - 2021, if not utilized. During
2000 we determined that an ownership change under Section 382 of the Internal
Revenue Code of 1986, as amended, occurred during 1998. The effect of the
ownership change is the imposition of a $3,193 annual limitation on the use of
NOL carryforwards attributable to periods before the change. This annual
limitation will result in the expiration of some NOL carryforward credits
before utilization. At December 31, 2001 the amount of NOL subject to the
limitation was $47,070 and the amount not subject to limitation was $46,011.

   Effective January 1, 1999 the New Jersey Division of Taxation established a
program that allows new or expanding technology and biotechnology businesses to
"sell" their "Unused NOL Carryover and Unused Research and Development Tax
Credits" to corporate taxpayers in the state for at least 75% of the value of
the benefits. The current state tax provision (benefit) in 1999 and 2000
includes $1,434 and $944, respectively, for sales of portions of our NOLs and
Research and Development Tax Credits. There were no such sales during 2001.

   Other Liquidity Matters.  In connection with our merger with Essex Medical
Products in 1987, we issued promissory notes to Essex Chemical Corporation in
the principal amount of $100 and committed to pay 20% of our net after-tax
income until a total of $1,000 has been paid, contingent upon the occurrence of
certain events. On June 6, 1991, we repaid the $100 of notes, plus accrued
interest to Essex. As the result of our net income in 2000 we accrued $667
payable to Essex, which remains accrued at December 31, 2001. At our option,
this obligation may be satisfied by the payment of shares of our common stock
having a fair market value equal to the amount owed, provided such shares are
registered for sale with the SEC.

   In February 2000, we entered into a binding letter of intent with Eos to
develop and commercialize genomics-derived antibody-based therapeutic products.
Pursuant to the letter of intent, in May 2000 we paid $5,000 to Eos and
deposited an additional $20,000 in a third party escrow account, to be released
over time upon

                                      46

<PAGE>

the achievement of certain milestones. This escrow deposit is included on our
December 31, 2000 balance sheet as segregated cash. In September 2000, we also
purchased shares of preferred stock of Eos for an aggregate purchase price of
$2,500, which was part of a $27,500 private placement. In April 2001, a new
binding letter of intent with Eos was signed which superceded the original
letter mentioned above. As a result of the restructured agreement, Eos refunded
the initial $5,000 (plus $279 in interest) and we received the original $20,000
deposit (plus $1,042 in interest) from escrow.

   In July 2000, we entered into an Agreement with IDM whereby we licensed to
IDM certain of our technologies in exchange for equity units in IDM. As a
result of this transaction, we realized a gain from the transfer of technology
of approximately $40,500 (based upon an independent valuation). In accordance
with Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements, we will recognize this gain over a 24-month period as contract
revenue. Accordingly, at December 31, 2001, approximately $14,300 remains
unrecognized and will be recorded as revenue during 2002.

   As discussed in Note 14 to the consolidated financial statements included
elsewhere in this Annual Report, and as set forth in the table below, in
addition to its convertible subordinated notes, Medarex is obligated under
non-cancelable operating leases as follows:

<TABLE>
<CAPTION>
                                                Convertible
                                                Subordinate Operating
                                        Total      Notes     Leases
                                       -------- ----------- ---------
           <S>                         <C>      <C>         <C>
           2002....................... $  2,140  $     --    $ 2,140
           2003.......................    2,105        --      2,105
           2004.......................    2,038        --      2,038
           2005.......................    1,790        --      1,790
           2006.......................  176,327   175,000      1,327
           2007 and thereafter........    2,082        --      2,082
                                       --------  --------    -------
                                       $186,482  $175,000    $11,482
                                       ========  ========    =======
</TABLE>

   In addition, we have commitments for research funding and the use of a
license for database products of approximately $10,500 in 2002 and
approximately $3,000 per year thereafter through 2008.

   Future Liquidity Resources.  Our current sources of liquidity are cash, cash
equivalents and marketable securities, interest and dividends earned on such
cash, cash equivalents and marketable securities, sales of our products for
research, and contract and licensing revenue. We believe that such sources of
liquidity will be sufficient to meet our operating, debt service, and capital
requirements for at least the next 24 months. However, we may require
additional financing within this time and may raise funds through public or
private financings, line of credit arrangements, collaborative relationships
and/or other methods.

Recently Issued Accounting Pronouncements

   In June 2001, the Financial Accounting Standards Board, or FASB, issued
Statement No. 142, Goodwill and Other Intangible Assets, effective for fiscal
years beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have infinite lives will no longer be amortized but
will be subject to annual impairment tests in accordance with the Statement.
Other intangible assets will continue to be amortized over their useful lives.
We are currently reviewing the impact of Statement No. 142, which is not
expected to have a material impact on our operating results or financial
position.

   In August 2001, the FASB issued Statement of Financial Accounting Standards,
or Statement, No. 143, Accounting for Asset Retirement Obligations, which
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. Statement 143 requires an enterprise to record the fair value
of an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible long-lived
assets. Since the

                                      47

<PAGE>

requirement is to recognize the obligation when incurred, approaches that have
been used in the past to accrue the asset retirement obligation over the life
of the asset are no longer acceptable. Statement 143 also requires the
enterprise to record the contra to the initial obligation as an increase to the
carrying amount of the related long-lived asset (i.e., the associated asset
retirement costs) and to depreciate that cost over the life of the asset. The
liability is increased at the end of each period to reflect the passage of time
(i.e., accretion expense) and changes in the estimated future cash flows
underlying the initial fair value measurement. Enterprises are required to
adopt Statement 143 for fiscal years beginning after June 15, 2002. We are in
the process of evaluating this Statement and the effect that it will have on
our consolidated financial statements.

   In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, effective for fiscal years
beginning after December 15, 2001. Statement No. 144 supersedes Statement No.
121 and identifies the methods to be used in determining fair value. We are
currently reviewing the impact of Statement No. 144 and do not believe adoption
of this statement will have a material impact on our operating results or
financial position.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risks

   We do not use derivative financial instruments in our operations or
investment portfolio. However, we regularly invest excess operating cash in
deposits with major financial institutions, money market funds, notes issued by
the U.S. Government, as well as fixed income investments and U.S. bond funds
both of which can be readily purchased or sold using established markets. We
believe that the market risk arising from our holdings of these financial
instruments is minimal. We do not have exposure to market risks associated with
changes in interest rates as we have no variable interest rate debt
outstanding. We do not believe we have any material exposure to market risks
associated with interest rates.

   We may be exposed to exchange conversion differences in translating the
foreign results of our investment in Genmab to U.S. dollars. Depending upon the
relative strengthening or weakening of the U.S. dollar, the conversion
difference could be significant.

                                      48

<PAGE>

Item 8.  Consolidated Financial Statements and Supplementary Data

                  Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                                     Page
-                                                                                                    ----
<S>                                                                                                  <C>
Medarex, Inc.
Report of Independent Auditors...................................................................... F-2
Consolidated Balance Sheets as of December 31, 2000 and 2001........................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001.......... F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1999,
  2000 and 2001..................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001.......... F-6
Notes to Consolidated Financial Statements.......................................................... F-7

Genmab A/S (A Development Stage Company)
Report of Independent Accountants................................................................... F-28
Consolidated Balance Sheets as of December 31, 2001 and 2000........................................ F-29
Consolidated Statements of Operations for the twelve months ended December 2001, 2000 and 1999 and
  the total since inception......................................................................... F-30
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999
  and for the period from inception (June 11, 1998) to December 31, 2001............................ F-31
Consolidated Statements of Cash Flows for the twelve months ended December 31, 2001, 2000 and 1999
  and the total since inception..................................................................... F-35
Notes to Consolidated Financial Statements.......................................................... F-36
</TABLE>

                                      F-1

<PAGE>

                        Report of Independent Auditors

The Board of Directors and Shareholders
Medarex, Inc.

   We have audited the accompanying consolidated balance sheets of Medarex,
Inc. and subsidiaries as of December 31, 2000 and 2001, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of Genmab A/S as of December 31, 2001 and
for the year then ended, (a corporation in which the Company has a 33%
interest), have been audited by other auditors whose report dated February 10,
2002 has been furnished to us and included an explanatory paragraph that stated
that "the Company has restated its previously reported net loss for fiscal year
2000 to conform with accounting principles generally accepted in the United
States"; insofar as our opinion on the consolidated financial statements
relates to data included for Genmab A/S, it is based solely on their report.

   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 and the report of
other auditors provide a reasonable basis for our opinion.

   In our opinion based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Medarex, Inc. and subsidiaries
at December 31, 2000 and 2001, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States.

   As discussed in Note 2 to the consolidated financial statements, the Company
has restated its 2000 consolidated financial statements to reflect is
proportionate share of the restated 2000 net loss of Genmab A/S.

                                          /s/  ERNST & YOUNG LLP

MetroPark, New Jersey
February 19, 2002

                                      F-2

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                   December 31, December 31,
                                                                                       2000         2001
                                                                                   ------------ ------------
<S>                                                                                <C>          <C>
                                     ASSETS                                         (Restated)
Current assets:
   Cash and cash equivalents......................................................  $   78,397   $  31,269
   Marketable securities..........................................................     265,206     435,683
   Prepaid expenses and other current assets......................................      23,422      24,860
                                                                                    ----------   ---------
       Total current assets.......................................................     367,025     491,812
Property, buildings and equipment:
   Land...........................................................................          --       6,788
   Buildings and leasehold improvements...........................................       2,356      56,080
   Machinery and equipment........................................................       6,503      16,188
   Furniture and fixtures.........................................................         409       2,819
   Construction in progress.......................................................      20,000       7,767
                                                                                    ----------   ---------
                                                                                        29,268      89,642
   Less accumulated depreciation and amortization.................................      (5,837)     (9,782)
                                                                                    ----------   ---------
                                                                                        23,431      79,860
   Investments in Genmab..........................................................      77,195      65,501
   Investments in IDM.............................................................      48,199      48,199
   Investments in, and advances to, other affiliates and partners.................       7,634      14,384
   Segregated cash................................................................      22,068       1,300
   Other assets...................................................................      12,555      19,371
                                                                                    ----------   ---------
       Total assets...............................................................  $  558,107   $ 720,427
                                                                                    ==========   =========
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Trade accounts payable.........................................................  $    1,463   $   3,139
   Accrued liabilities............................................................       5,945      21,485
   Deferred contract revenue--current.............................................      29,810      19,862
                                                                                    ----------   ---------
       Total current liabilities..................................................      37,218      44,486
Deferred contract revenue--long-term..............................................      15,326       1,597
Deferred taxes and other long-term obligations....................................      20,274      16,782
Convertible subordinated notes....................................................          --     175,000
Commitments.......................................................................          --          --
Shareholders' equity:
   Preferred stock, $1.00 par value, 2,000,000 shares authorized; none issued and
     outstanding..................................................................          --          --
   Common stock, $.01 par value; 200,000,000 shares authorized; 73,802,666 shares
     issued and 72,597,666 outstanding at December 31, 2000 and 74,005,466 shares
     issued and 72,876,240 shares outstanding at December 31, 2001................         738         740
   Capital in excess of par value.................................................     569,410     570,655
   Treasury stock, at cost 1,205,000 shares in 2000 and 1,129,226 shares in 2001..      (3,031)     (2,840)
   Deferred compensation..........................................................       2,234       2,188
   Accumulated other comprehensive income.........................................      39,313      37,881
   Accumulated deficit............................................................    (123,375)   (126,062)
                                                                                    ----------   ---------
       Total shareholders' equity.................................................     485,289     482,562
                                                                                    ----------   ---------
       Total liabilities and shareholders' equity.................................  $  558,107   $ 720,427
                                                                                    ==========   =========
</TABLE>

             See notes to these consolidated financial statements.

                                      F-3

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                                       ------------------------------
                                                                         1999        2000      2001
                                                                       --------   ---------- --------
                                                                                  (Restated)
<S>                                                                    <C>        <C>        <C>
Sales................................................................. $  1,079    $    264  $    191
Contract and license revenues.........................................    8,593      19,619    37,140
Sales, contract and license revenues from Genmab......................      252       2,574     4,973
                                                                       --------    --------  --------
   Total revenues.....................................................    9,924      22,457    42,304
Costs and expenses:
   Cost of sales......................................................      709       1,189       642
   Research and development...........................................   19,929      33,942    38,626
   General and administrative.........................................    8,036      18,142    19,344
                                                                       --------    --------  --------
   Total cost and expenses............................................   28,674      53,273    58,612
                                                                       --------    --------  --------
       Operating loss.................................................  (18,750)    (30,816)  (16,308)
Equity in net loss of affiliate.......................................       --        (353)   (7,334)
Interest and dividend income..........................................    1,205      21,158    24,728
Interest expense......................................................       (8)         (3)   (4,615)
Gain on disposition of Genmab stock...................................       --          --     1,442
                                                                       --------    --------  --------
       Loss before provision (benefit) for income taxes...............  (17,553)    (10,014)   (2,087)
Provision (benefit) for income taxes..................................     (522)    (13,075)      600
                                                                       --------    --------  --------
       Net income (loss).............................................. $(17,031)   $  3,061  $ (2,687)
                                                                       ========    ========  ========
Basic net income (loss) per share..................................... $  (0.27)   $   0.04  $  (0.04)
                                                                       ========    ========  ========
Diluted net income (loss) per share................................... $  (0.27)   $   0.04  $  (0.04)
                                                                       ========    ========  ========
Weighted-average number of common shares outstanding during the period
 --basic..............................................................   63,840      71,532    73,937
 --diluted............................................................   63,840      73,232    73,937
</TABLE>


              See notes to these consolidated financial statements.

                                      F-4

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                           Common stock                    Treasury Stock
                                                                         -----------------              -------------------
                                                                           Number            Capital      Number
                                                                             of             in excess       of
                                                                           shares   Amount of par value   shares    Amount
                                                                         ---------- ------ ------------ ----------  -------
<S>                                                                      <C>        <C>    <C>          <C>         <C>
Balance at December 31, 1998
  As previously reported................................................ 31,507,186  $315    $144,252
2-for-1 stock split effective September 27, 2000........................ 31,507,186   315        (315)
                                                                         ----------  ----    --------
Balance at December 31, 1998............................................ 63,014,372   630     143,937
Issuance of common stock for exercise of options and grant of restricted
 shares.................................................................    907,330     9       3,694
Issuance of common stock in private placements..........................    246,002     2         898
Exercise of warrants....................................................     57,180     1         127
Issuance of common stock for Executive Deferred Compensation Plan.......  1,205,000    12          49   (1,205,000) $(3,031)
Net loss................................................................
Other comprehensive income--unrealized loss on securities...............

   Comprehensive loss...................................................
                                                                         ----------  ----    --------   ----------  -------
Balance at December 31, 1999............................................ 65,429,884   654     148,705   (1,205,000)  (3,031)
                                                                         ----------  ----    --------   ----------  -------
Issuance of common stock in public offering.............................  4,798,408    48     388,083
Exercise of warrants....................................................    909,592     9       4,539
Issuance of common stock for exercise of options and grant of restricted
 shares.................................................................  2,664,782    27      19,920
Tax benefit from exercise of stock options..............................                        8,163
Net income (restated)...................................................
Other comprehensive income--unrealized appreciation to carrying value
 of affiliate, net tax of $20,274.......................................
  foreign currency translation adjustment...............................
  unrealized gain on securities.........................................

   Comprehensive income.................................................
                                                                         ----------  ----    --------   ----------  -------
Balance at December 31, 2000............................................ 73,802,666   738     569,410   (1,205,000)  (3,031)
                                                                         ----------  ----    --------   ----------  -------
Issuance of common stock for exercise of options and grant of restricted
 shares.................................................................    202,800     2       1,225
Early withdrawal from executive deferred compensation plan..............                           20       75,774      191
Net loss................................................................
Other comprehensive income (loss)--change in unrealized appreciation
 to carrying value of affiliate.........................................
 foreign currency translation adjustment................................
  unrealized gain on securities.........................................

  Comprehensive loss....................................................
                                                                         ----------  ----    --------   ----------  -------
Balance at December 31, 2001............................................ 74,005,466   740     570,655   (1,129,226)  (2,840)
                                                                         ==========  ====    ========   ==========  =======
</TABLE>
<TABLE>
<CAPTION>

                                                                                       Accumulated
                                                                                          other                     Total
                                                                           Deferred   comprehensive Accumulated shareholders'
                                                                         Compensation income (loss)   deficit      equity
                                                                         ------------ ------------- ----------- -------------
<S>                                                                      <C>          <C>           <C>         <C>
Balance at December 31, 1998
  As previously reported................................................                 $    67     $(109,405)   $ 35,229
2-for-1 stock split effective September 27, 2000........................                                                --
                                                                                         -------     ---------    --------
Balance at December 31, 1998............................................                      67      (109,405)     35,229
Issuance of common stock for exercise of options and grant of restricted
 shares.................................................................                                             3,703
Issuance of common stock in private placements..........................                                               900
Exercise of warrants....................................................                                               128
Issuance of common stock for Executive Deferred Compensation Plan.......    $2,970                                      --
Net loss................................................................                               (17,031)    (17,031)
Other comprehensive income--unrealized loss on securities...............                    (630)                     (630)
                                                                                                                  --------
   Comprehensive loss...................................................                                           (17,661)
                                                                            ------       -------     ---------    --------
Balance at December 31, 1999............................................     2,970          (563)     (126,436)     22,299
                                                                            ------       -------     ---------    --------
Issuance of common stock in public offering.............................                                           388,131
Exercise of warrants....................................................                                             4,548
Issuance of common stock for exercise of options and grant of restricted
 shares.................................................................      (736)                                 19,211
Tax benefit from exercise of stock options..............................                                             8,163
Net income (restated)...................................................                                 3,061       3,061
Other comprehensive income--unrealized appreciation to carrying value
 of affiliate, net tax of $20,274.......................................                  38,030                    38,030
  foreign currency translation adjustment...............................                    (788)                     (788)
  unrealized gain on securities.........................................                   2,634                     2,634
                                                                                                                  --------
   Comprehensive income.................................................                                            43,210
                                                                            ------       -------     ---------    --------
Balance at December 31, 2000............................................     2,234        39,313      (123,375)    485,289
                                                                            ------       -------     ---------    --------
Issuance of common stock for exercise of options and grant of restricted
 shares.................................................................       165                                   1,392
Early withdrawal from executive deferred compensation plan..............      (211)                                     --
Net loss................................................................                                (2,687)     (2,687)
Other comprehensive income (loss)--change in unrealized appreciation
 to carrying value of affiliate.........................................                    (459)                     (459)
 foreign currency translation adjustment................................                  (3,496)                   (3,496)
  unrealized gain on securities.........................................                   2,523                     2,523
                                                                                                                  --------
  Comprehensive loss....................................................                                            (1,432)
                                                                            ------       -------     ---------    --------
Balance at December 31, 2001............................................     2,188        37,881      (126,062)    482,562
                                                                            ======       =======     =========    ========
</TABLE>

                See notes to consolidated financial statements.

                                      F-5

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                    December 31,
                                                                                          --------------------------------
                                                                                             1999       2000       2001
                                                                                          ----------  ---------  ---------
                                                                                                     (Restated)
<S>                                                                                       <C>         <C>        <C>
Operating activities:
   Net income (loss)..................................................................... $  (17,031) $   3,061  $  (2,687)
   Adjustments to reconcile net income (loss) to net cash used in operating activities:
      Depreciation.......................................................................        696        867      3,432
      Amortization.......................................................................        352        380      1,161
      Stock options to employees.........................................................         --      4,174         --
      Stock bonus to employees...........................................................      2,279         84      1,956
      Stock options and warrants to non-employees........................................         --      7,175        114
      Non cash revenue--IDM..............................................................         --     (5,901)   (20,233)
      Non cash revenue--Genmab...........................................................         --       (667)    (1,333)
      Equity in net loss of Genmab.......................................................         --        353      7,334
      Gain on disposition of Genmab stock................................................         --         --     (1,442)
      Deferred income taxes..............................................................         --    (13,075)       600
Changes in operating assets and liabilities:
   Other current assets..................................................................     (1,934)    (9,940)    (6,857)
   Trade accounts payable................................................................        226        843      1,676
   Accrued liabilities...................................................................        278      1,440     10,700
   Deferred contract revenue.............................................................      9,524     (3,168)    (2,111)
                                                                                          ----------  ---------  ---------
      Net cash used in operating activities..............................................     (5,610)   (14,374)    (7,690)
Investing activities:
   Purchase of property, buildings and equipment.........................................       (740)   (21,561)   (55,009)
   Increase in investment in Genmab......................................................         --    (18,000)        --
   Decrease (increase) in investments and advances to affiliates and partners............         62    (14,902)    (6,750)
   Decrease (increase) in segregated cash................................................         --    (20,768)    20,768
   Purchase of marketable securities.....................................................     (4,000)  (294,431)  (175,500)
   Sales of marketable securities........................................................     17,842     47,641      7,544
                                                                                          ----------  ---------  ---------
      Net cash provided by (used in) investing activities................................     13,164   (322,021)  (208,947)
Financing activities:
   Cash received from sales of securities, net...........................................      2,452    400,457        420
   Proceeds from sale of convertible subordinated notes, net.............................         --         --    169,114
   Principal payments under debt obligations.............................................        (51)       (31)       (25)
                                                                                          ----------  ---------  ---------
      Net cash provided by financing activities..........................................      2,401    400,426    169,509
                                                                                          ----------  ---------  ---------
      Net increase in cash and cash equivalents..........................................      9,955     64,031    (47,128)
Cash and cash equivalents at beginning of period.........................................      4,411     14,366     78,397
                                                                                          ----------  ---------  ---------
Cash and cash equivalents at end of period............................................... $14,366.00  $  78,397  $  31,269
                                                                                          ==========  =========  =========
Supplemental disclosures of cash flow information
   Cash paid during period for:
      Income taxes....................................................................... $       --  $     292  $      --
                                                                                          ----------  ---------  ---------
      Interest........................................................................... $        8  $       3  $       1
                                                                                          ----------  ---------  ---------
</TABLE>

             See notes to these consolidated financial statements.

                                      F-6

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

1.  Nature of Operations

   Medarex, Inc. ("Medarex" or the "Company"), incorporated in July 1987, is a
biotechnology company developing therapeutic products for cancer, autoimmune
disease and other life-threatening and debilitating diseases based on
proprietary technology in the field of immunology. The Company's therapeutic
products are currently under development and will need the approval of the U.S.
Food and Drug Administration ("FDA") prior to commercial distribution in the
United States.

   The Company has three wholly-owned subsidiaries: Medarex Europe B.V. which
was incorporated in the Netherlands on October 31, 1996; Houston Biotechnology
Incorporated ("HBI") which was acquired on February 28, 1997; and GenPharm
International, Inc. ("GenPharm") which was acquired on October 21, 1997. The
Company also holds equity interests in various companies and accounts for them
either through the equity or cost methods. As of December 31, 2001, the Company
has significant investments in Genmab A/S ("Genmab") (see Note 12) and
Immuno-Designed Molecules ("IDM") S.A. (see Note 13). The Company's operations
constitute one business segment. All significant intercompany balances and
transactions have been eliminated in consolidation.

2.  Significant Accounting Policies

   Cash Equivalents

   The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents. The
Company invests its cash in deposits with major financial institutions, money
market funds and notes issued by the U. S. government.

   Marketable Securities

   Marketable securities consist of fixed income investments with a maturity of
greater than three months and U.S. bond funds, both of which can be readily
purchased or sold using established markets. Such securities, which are
classified as "available-for-sale," are carried at market with unrealized gains
and losses reported in other comprehensive income (loss), which is a separate
component of shareholders' equity. These unrealized gains and losses are
considered temporary.

   Financial Instruments

   The fair values of cash and cash equivalents, marketable securities,
accounts payable, accrued liabilities and convertible subordinated notes
payable are not materially different from their carrying amounts as of December
31, 2000 and 2001. Receivables from corporate partners are concentrated
primarily in the pharmaceutical and biotechnology industries. Although the
Company's partners are concentrated primarily within these two industries,
management considers the likelihood of material credit risk as remote.

   Inventory

   Inventory consists primarily of antibodies to be sold to Genmab and is
stated at the lower of cost or market with cost determined on a first-in,
first-out basis.

                                      F-7

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   Property, Buildings and Equipment

   Property, buildings and equipment are stated at cost. Depreciation is
determined using straight-line methods over the estimated useful lives of the
various asset classes. Useful lives for buildings and building improvements,
furniture and fixtures and machinery and equipment principally range from
fifteen to thirty years, five years and three to five years, respectively.
Leasehold improvements are amortized over the estimated useful lives of the
assets or the related lease terms, whichever is shorter.

   Transactions in Affiliates Stock

   At the time an affiliate sells its stock to unrelated parties at a price in
excess of its book value, the Company's net investment in that affiliate
increases proportionately to its equity basis in the affiliate. If at that time
the affiliate is a newly-formed start-up, a research and development or a
development stage company, the Company's proportionate share of the affiliates'
equity resulting from the additional equity raised is accounted for as an
equity transaction under Accounting Principles Board ("APB") Opinion No. 18 and
Staff Accounting Bulletin ("SAB") No. 51. Such transactions are reflected as
equity transactions in the accompanying statement of shareholders' equity. If
an affiliate's common stock is listed on a national market and the Company's
investment in the affiliate is not accounted for under the equity method, then
the investment is classified as marketable securities and carried at fair
market value.

   Revenue Recognition

   The Company sells antibodies primarily to corporate partners in the United
States and overseas. Revenue from these sales is recognized when the products
are shipped.

   Revenue related to collaborative research with the Company's corporate
partners is recognized as research services are performed over the related
funding periods for each contract. Under these agreements, the Company is
required to perform research and development activities as specified in each
respective agreement. Deferred revenue may result when the Company does not
expend the required level of effort during a specific period in comparison to
funds received under the respective contracts or when funds received are
refundable under certain circumstances. Milestone and royalty payments, if any,
are recognized pursuant to collaborative agreements upon the achievement of
specified milestones.

   Non-refundable upfront payments received in connection with research and
development collaboration agreements are deferred and recognized on a
straight-line basis over the relevant periods in the agreement, generally the
research term.

   Research and Development

   Research and development costs are expensed as incurred.

   Use of Estimates

   The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

                                      F-8

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   Stock Based Compensation

   In accordance with the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, the
Company applies APB Opinion 25 and related interpretations in accounting for
its stock option plans and, accordingly, does not recognize compensation
expense for stock options granted at fair market value. Note 8 to the
consolidated financial statements contains a summary of the pro-forma effects
to reported net loss and loss per share for 1999, 2000 and 2001 as if the
Company had elected to recognize compensation expense based on the fair value
of the options granted at grant date as prescribed by SFAS No. 123.

   Foreign Currency Translation

   Investments in foreign affiliates have been translated into U.S. dollars in
accordance with the Financial Accounting Standards Board ("FASB") Statement No.
52, Foreign Currency Translation. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date. Income
statement amounts have been translated using the average exchange rate for the
year. The gains and losses resulting from the changes in exchange rates from
year to year have been reported in other comprehensive income (loss).

   Restatement of 2000 Consolidated Financial Statements

   The Company's 2000 consolidated financial statements have been restated to
reflect its proportionate share of the restated 2000 net loss of Genmab A/S.
The 2001 financial statements of Genmab A/S include a restated reconciliation
of the net loss according to Danish generally accepted accounting principles
and accounting principles generally accepted in the United States for 2000 to
record additional compensation expense related to stock awards. The effect of
the restatement by Genmab has resulted in a decrease to the 2000 net income of
Medarex of $273 ($0.01 per basic and diluted share).

   Net Income (Loss) Per Share

   Basic and diluted earnings per share is calculated in accordance with the
FASB SFAS No. 128, Earnings per Share. Basic earnings per share is based upon
the number of weighted average shares of common stock outstanding. Diluted
earnings per share is based upon the weighted average number of shares of
common stock and dilutive potential shares of common stock outstanding.
Potential shares of common stock are outstanding stock options which are
included under the treasury stock method for the year ended December 31, 2000.
For the years ended December 31, 1999 and 2001, potentially dilutive securities
have been excluded from the computation, as their effect is antidilutive.

   The computation of basic and diluted earnings per share for the years ended
December 31, 1999, 2000 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                           1999        2000       2001
                                                           ----        ----       ----
                                                                    (Restated)
<S>                                                     <C>         <C>        <C>
Numerator:
   Net income (loss)...................................   $(17,031)     $3,061    $(2,687)
                                                          ========      ======    =======
Denominator:
   Denominator for basic net income (loss) per share
     --weighted average shares......................... 63,840,000  71,532,000 73,937,000
   Effect of dilutive securities:
       Stock options...................................         --   1,700,000         --
   Denominator for diluted net income (loss) per share  63,840,000  73,232,000 73,937,000
     --adjusted weighted-average shares................ ----------  ---------- ----------
Basic net income (loss) per share......................     $(0.27)      $0.04     $(0.04)
Diluted net income (loss) per share....................     $(0.27)      $0.04     $(0.04)
</TABLE>

                                      F-9

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   The following options to purchase shares of common stock were outstanding
during 2000, but were not included in the computation of diluted earnings per
share because the options' exercise price was greater than the average market
price of the common shares for the year and, therefore, the effect would be
antidilutive:

<TABLE>
                    <S>                             <C>
                    Number of options.............. 142,200
                    Weighted-average exercise price  $53.50
</TABLE>

   Impact of Recently Issued Accounting Pronouncements

   In June 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets, effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to have
infinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statement. Other intangible assets will
continue to be amortized over their useful lives. The Company is currently
reviewing the impact of Statement No. 142, which is not expected to have a
material impact on our operating results or financial position.

   In August 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Statement No. 143 requires an enterprise
to record the fair value of an asset retirement obligation as a liability in
the period in which it incurs a legal obligation associated with the retirement
of tangible long-lived assets. Since the requirement is to recognize the
obligation when incurred, approaches that have been used in the past to accrue
the asset retirement obligation over the life of the asset are no longer
acceptable. Statement 143 also requires the enterprise to record the contra to
the initial obligation as an increase to the carrying amount of the related
long-lived asset (i.e., the associated asset retirement costs) and to
depreciate that cost over the life of the asset. The liability is increased at
the end of each period to reflect the passage of time (i.e., accretion expense)
and changed in the estimated future cash flows underlying the initial fair
value measurement. Enterprises are required to adopt Statement 143 for fiscal
years beginning after June 15, 2002. The Company is in the process of
evaluating Statement No. 143 and the effect that it will have on our
consolidated financial statements.

   In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, effective for fiscal years
beginning after December 15, 2001. Statement No. 144 supersedes Statement No.
121 and identifies the methods to be used in determining fair value. The
Company is currently reviewing the impact of Statement No. 144 and does not
believe adoption of this statement will have a material impact on our operating
results or financial position.

                                     F-10

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


3.  Available for Sale Investments

   Available for sale investments consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                  2000                            2001
                                     ------------------------------- -------------------------------
                                              Unrealized  Estimated           Unrealized  Estimated
                                       Cost   Gain (Loss) Fair Value   Cost   Gain (Loss) Fair Value
                                     -------- ----------- ---------- -------- ----------- ----------
<S>                                  <C>      <C>         <C>        <C>      <C>         <C>
Money market funds (included in cash
  and cash equivalents)............. $ 72,727   $   --     $ 72,727  $ 27,365   $    --    $ 27,365
U.S. Treasury Obligations...........   26,158      237       26,395    59,667       995      60,662
U.S. Corporate Debt Securities......  234,420    2,416      236,836   362,877     5,613     368,490
Equity Securities...................    2,556     (581)       1,975     8,544    (2,013)      6,531
                                     --------   ------     --------  --------   -------    --------
                                     $335,861   $2,072     $337,933  $458,453   $ 4,595    $463,048
                                     ========   ======     ========  ========   =======    ========
</TABLE>

   The Company's available for sale investments have the following maturities
at December 31, 2001:

<TABLE>
               <S>                                      <C>
               Due in one year or less................. $ 74,361
               Due after one year, less than five years  262,825
               Due after five years....................  125,862
</TABLE>

4.  Balance Sheet Detail

   Other current assets consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                   2000    2001
                                                  ------- -------
              <S>                                 <C>     <C>
              Receivables from corporate partners $ 4,174 $10,742
              Interest and dividends receivable..   6,460   4,561
              Deferred tax benefit...............   8,743   3,324
              Inventory..........................      --   3,186
              Due from Officer...................      --     775
              Payroll taxes receivable--employees     363      --
              Other..............................   3,682   2,272
                                                  ------- -------
                                                  $23,422 $24,860
                                                  ======= =======
</TABLE>

   Included in "Due from Officer" is a promissory note of approximately $751
for the payment of taxes from the Company's President and Chief Executive
Officer in connection with the transfer by the Company to the Company's
President and Chief Executive Officer of Genmab shares as a stock-based bonus
(See Note 12). The note, including all interest, was repaid on February 12,
2002. The note was due no later than five years from issuance and was full
recourse. Interest was payable on the stated maturity or any accelerated
maturity at the prime rate, compounded quarterly. This loan related to income
taxes payable by the individual in connection with the stock bonus.

                                     F-11

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   Other assets consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                2000    2001
                                               ------- -------
                  <S>                          <C>     <C>
                  Deferred tax benefit........ $12,131 $13,708
                  Deferred debt issuance costs      --   5,281
                  Other.......................     424     382
                                               ------- -------
                                               $12,555 $19,371
                                               ======= =======
</TABLE>

   Accrued liabilities consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                        2000   2001
                                                       ------ -------
          <S>                                          <C>    <C>
          Accrued construction and equipment costs.... $  431 $ 5,648
          Accrued interest............................     --   4,047
          Accrued compensation........................  2,229   3,355
          Accrued license fees........................     --   2,835
          Accrued database subscriptions..............     --   2,500
          Accrued professional fees...................  1,022     815
          Due to Essex Chemical Corp..................    667     667
          Accrued clinical trial exp..................    511     133
          Other.......................................  1,085   1,485
                                                       ------ -------
                                                       $5,945 $21,485
                                                       ====== =======
</TABLE>

5.  Taxes

   Income tax expense is determined using the liability method.

   The provision (benefit) for income taxes is as follows:

<TABLE>
<CAPTION>
                                               Year ended December 31
                                               -----------------------
                                                1999      2000    2001
                                               -------  --------  ----
         <S>                                   <C>      <C>       <C>
         Federal
            Current........................... $    --  $  5,134  $ --
            Deferred..........................      --   (16,978)   --
                                               -------  --------  ----
                Total federal.................      --   (11,844)   --
         State
            Current...........................    (522)    1,357    --
            Deferred..........................      --    (3,296)   --
                                               -------  --------  ----
                Total state...................    (522)   (1,939)   --
         Foreign
            Current...........................   1,200       108    --
            Deferred..........................  (1,200)      600   600
                                               -------  --------  ----
                Total foreign.................      --       708   600
                                               -------  --------  ----
                   Total...................... $  (522) $(13,075) $600
                                               =======  ========  ====
</TABLE>

   The current state tax provision (benefit) in 1999 and 2000 include $1,434,
and $944, respectively, attributable to the Company's sale of certain state net
operating loss and credit carryforwards. The Company had no such sales in 2001.
The current and deferred foreign tax provisions relate to foreign withholding
taxes.

                                     F-12

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   A reconciliation of the provision (benefit) for income taxes and the amount
computed by applying the federal income rate of 34% to income before provision
(benefit) for income tax is as follows:

<TABLE>
<CAPTION>
                                                              Year ended December 31
                                                            --------------------------
                                                             1999      2000     2001
                                                            -------  --------  -------
<S>                                                         <C>      <C>       <C>
Computed at statutory rate................................. $(5,968) $ (3,085) $  (637)
State income taxes, net of federal tax effect..............    (338)      648       --
Loss of foreign subsidiary.................................     346       515    2,705
Permanent items related to the acquisition of subsidiaries,
  the write off of technology and investment in foreign
  joint venture............................................   2,550        --       --
Foreign withholding taxes..................................      --       671      600
Change in valuation allowance related to unrealized gain...      --   (20,274)      --
Other......................................................      33       321       15
Other change in deferred tax valuation reserve.............   2,855     8,129   (2,083)
                                                            -------  --------  -------
                                                            $  (522) $(13,075) $   600
                                                            =======  ========  =======
</TABLE>

   The components of deferred tax assets and liabilities consist of the
following as of December 31:

<TABLE>
<CAPTION>
                                                              2000      2001
                                                            --------  --------
<S>                                                         <C>       <C>
Deferred tax assets:
   Net operating loss carryforwards........................ $ 26,502  $ 35,045
   Accrued compensation....................................    3,450        --
   Fixed assets............................................       --     1,280
   R&D capitalized for tax purposes........................    4,148     4,217
   Deferred revenue........................................   17,828     9,010
   Research credits........................................    3,190     3,936
   Foreign withholding tax.................................      600        --
   Other...................................................      300       478
                                                            --------  --------
                                                              56,018    53,966
   Deferred tax asset valuation allowance..................  (34,945)  (36,934)
                                                            --------  --------
                                                              21,073    17,032
                                                            --------  --------
Net deferred tax liabilities:
   Unrealized gain.........................................   20,274    17,032
   Other...................................................      199        --
                                                            --------  --------
                                                              20,473    17,032
                                                            --------  --------
Net deferred tax assets.................................... $    600  $     --
                                                            ========  ========
</TABLE>

   At December 31, 2001, approximately $11,640 of the deferred tax asset
related to net operating loss ("NOL") carryforwards and an equivalent amount of
deferred tax asset valuation allowance represented tax benefits associated with
the exercise of non-qualified stock options and the disqualifying disposition
of stock acquired with incentive stock options. Such benefits, when realized,
are credited to additional paid-in capital.

   At December 31, 2001, the Company had federal NOL carryforwards of
approximately $93,081. The NOL carryforwards expire in 2002 ($45), 2003 ($196),
2004 ($524), 2006 ($863), 2007 ($3,985), 2008 ($5,533), 2009

                                     F-13

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

($7,592), 2010 ($6,395), 2011 ($7,028), 2012 ($9,642), 2018 ($20,925), 2019
($2,575), 2020 ($13,473) and 2021 ($14,305). During 2000 the Company determined
that an ownership change under Section 382 of the Internal Revenue Code of
1986, as amended, occurred during 1998. The effect of the ownership change is
the imposition of a $3,193 annual limitation on the use of NOL carryforwards
attributable to periods before change. At December 31, 2001, the amount of NOL
subject to the limitation was $47,070 and the amount not subject to limitation
was $46,011.

   The Company had federal research tax credit carryforwards at December 31,
2001 of approximately $3,017 which expire between 2005 and 2021. As a result of
the 1998 ownership change under Section 382, the use of approximately $1,358 of
these carryforwards is subject to limitation.

   As a result of the acquisition of HBI, the Company had additional federal
NOL carryforwards at December 31, 2001 of approximately $7,481. The NOL
carryforwards expire as follows: 2001 ($145), 2002 ($900), 2003 ($1,038), 2005
($295), 2006 ($783), 2007 ($666), 2008 ($781), 2009 ($114), 2013 ($74), and
2018 ($2,685). Also related to this acquisition, the Company had research
credit carryforwards of approximately $672 which expire between 2005 and 2010.
The use of these NOL and credit carryforwards is subject to an annual
limitation under Section 382. The Company has not determined the amount of the
limitation.

   At December 31, 2001, the Company had a state NOL carryforward of
approximately $22,730 that expires in 2007 ($11,700) and 2008 ($11,030).

6.  Convertible Subordinated Notes

   On June 26, 2001, the Company completed a public offering of $175,000, 4.5%
Convertible Subordinated Notes due 2006. The notes are convertible into shares
of common stock at a ratio of 34.6789 per each $1,000 principal amount of the
notes ($28.84 per share), subject to adjustment, and mature in July 2006. The
Company received net proceeds from the public offering of approximately
$169,100. As of December 31, 2001, we had 6,067,961 shares of common stock
reserved for issuance pursuant to the conversion of $175,000 aggregate
principal amount of our 4.5% Convertible Subordinated Notes due 2006. The cost
of issuance of the notes of approximately $5,886 have been deferred and are
being amortized over the term of the related notes. The amortization of these
costs are reflected in interest expense.

   The Company will pay interest on the notes on January 1 and July 1 of each
year. The first interest payment was made on January 1, 2002 and carried with
it an interest payment of $23.125 per $1,000 principal amount of notes due to
the additional five days of interest that had been accrued based on the closing
date of June 26, 2001. Interest payable per $1,000 principal amount of notes
for each subsequent interest period will be $22.50. Interest will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.

   The Company may redeem the notes in whole or in part, at its option, at any
time prior to July 1, 2004, at a redemption price equal to 100% of the
principal amount of the notes to be redeemed plus accrued and unpaid interest
to the redemption date, if the closing price of its common stock has exceeded
150% of the conversion price for at least 20 trading days in the consecutive
30-day trading period ending on the trading day prior to the date the Company
mails the notice of redemption.

   If the Company redeems the notes under these circumstances, it will make an
additional "make whole" payment on the redeemed notes equal to $135 per $1,000
principal amount of the notes, minus the amount of any interest actually paid
or accrued and unpaid on the notes prior to the date the Company mails the
notice of redemption. The Company may make these "make whole" payments, at its
option, either in cash or, subject to the satisfaction of the conditions of the
indenture, in shares of its common stock or a combination of cash and common
stock.

                                     F-14

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   Payments made in common stock will be valued at 95% of the average of the
closing sales prices of the Company's common stock for the five consecutive
trading days immediately preceding the third trading day prior to the
redemption date.

   On and after July 1, 2004, the Company may redeem the notes, in whole or in
part, at its option, at the redemption prices specified below. The redemption
price, expressed as a percentage of principal amount, is as follows for the
12-month periods beginning on July 1 of the following years:

<TABLE>
<CAPTION>
               Redemption
                 Year                                      Price
               ----------                                  -----
               <S>                                         <C>
               2004....................................... 101.8%
               2005....................................... 100.9%
</TABLE>

   In each case the Company will also pay accrued interest to the redemption
date.

   The holders of the notes have the option, subject to certain conditions, to
require the Company to repurchase any notes held by such holders in the event
of a "change in control", as defined in the indenture, at a price equal to 100%
of the principal amount of the notes plus accrued interest to the date of
repurchase. The Company may pay the repurchase price in cash or, at the
Company's option, in shares of its common stock. Payments made in shares of the
Company's common stock will be valued at 95% of the average of the closing
sales prices of the Company's common stock for the five trading days
immediately preceding the third trading day prior to the repurchase date.

7.  Shareholders' Equity

   In November 1999, Novartis Pharma AG ("Novartis") made a $1,000 equity
purchase of 246,002 shares of the Company's common stock pursuant to a license
agreement for the rights to use the HuMAb-Mouse technology. This payment
represents the second disbursement by Novartis pursuant to a license agreement
for the rights to use the HuMAb-Mouse technology. Of this amount, $900 is
included in equity and $100 was amortized into contract revenue as Novartis
evaluated additional HuMAb-Mouse targets.

   On March 3, 2000 the Company completed a follow-on public offering of
4,798,408 shares of common stock at a price of $86.00 per share resulting in
net proceeds to the Company of approximately $388,100.

   On September 12, 2000, the Company's Board of Directors approved a
two-for-one stock split of the Company's outstanding shares of common stock.
The stock split entitled each holder of record at the close of business on
September 27, 2000 to receive one additional share of common stock for every
share of common stock held by such shareholder. The accompanying consolidated
financial statements have been adjusted to give retroactive recognition to the
common stock split, effective on September 27, 2000, for all periods presented
by reclassifying from capital in excess of par value to common stock an amount
equal to the par value of the additional shares arising from the split. In
addition, all references in the consolidated financial statements to number of
shares and per share amounts have been adjusted.

   In May 2001, the Company's board of directors adopted a stockholder rights
plan. The stockholder rights plan provides for a dividend of one preferred
share purchase right on each outstanding share of the Company's common stock.
Each right entitles stockholders to buy 1/1000th of a share of the Company's
Series A junior

                                     F-15

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

participating preferred stock at an exercise price of $150.00. Each right will
become exercisable following the tenth day after person or group announces an
acquisition of 20% or more of the Company's common stock. The Company will be
entitled to redeem the rights at $0.001 per right at any time on or before the
close of business on the tenth day following acquisition by a person or group
of 20% or more of the Company's common stock.

8.  Stock Options

   The Company has twelve Stock Option Plans (the "Plans"). The purchase price
of stock options under the Plans is determined by the Stock Option Committee of
the Board of Directors of the Company (the "Committee"). The term is fixed by
the Committee, but no incentive stock option is exercisable after 10 years from
the date of grant. As a result of the 1997 HBI acquisition, outstanding HBI
options were converted to 374,942 Medarex options. At December 31, 2001, a
total of 1,869,000 shares were available for future grants under the Plans.

   In accordance with the terms of the Company's 1999 Stock Option Plan, on
November 1, 1999, five of the Company's employees were granted a total of
200,400 shares of restricted common stock. Under the terms of each restricted
stock agreement, the shares of restricted stock could not be sold, assigned,
pledged or transferred until the date on which the last reported sales price of
the Company's common stock as reported on the Nasdaq Stock Market equaled or
exceeded $8.50 per share for any 10 trading days out of any 20 consecutive
trading days. The Company's common stock closed at or above $8.50 per share 10
days between December 3, 1999 and December 17, 1999, therefore the restriction
on these shares lapsed on December 17, 1999 on which date the closing price was
$11.38 per share. The Company has recorded compensation expense of $2,279 in
its statement of operations for the year ended December 31, 1999 related to
these restricted stock grants.

   A summary of the Company's stock option activity and related information for
the years ended December 31, 1999, 2000 and 2001 follows:

<TABLE>
<CAPTION>
                                                       1999                 2000                2001
                                               -------------------  -------------------  ------------------
                                                           Weighted             Weighted            Weighted
                                                Common     Average   Common     Average   Common    Average
                                                 Stock     Exercise   Stock     Exercise   Stock    Exercise
                                                Options     Price    Options     Price    Options    Price
                                               ----------  -------- ----------  -------- ---------  --------
<S>                                            <C>         <C>      <C>         <C>      <C>        <C>
Outstanding at beginning of year..............  5,581,854   $ 2.09   5,181,264   $ 2.87  3,894,592  $  7.47
   Granted....................................  1,898,900     3.14   1,736,110    32.26  3,111,850    18.66
   Exercised.................................. (2,112,330)   (1.05) (2,664,782)   (3.35)  (202,800)   (5.49)
   Canceled...................................   (187,160)   (2.91)   (358,000)   (3.44)   (38,451)  (34.01)
                                               ----------           ----------           ---------
Outstanding at end of year....................  5,181,264     2.87   3,894,592     7.47  6,765,191    17.21
                                               ==========           ==========           =========
Exercisable at end of year....................  3,282,364            2,158,481           3,653,341
                                               ==========           ==========           =========
Weighted average fair value of options granted
 during the year..............................              $ 2.34               $29.94             $ 15.64
</TABLE>

                                     F-16

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   Stock options outstanding at December 31, 2001 are summarized as follows:

<TABLE>
<CAPTION>
                                              Weighted Average
       Range of        Outstanding Options at    Remaining     Weighted Average
    Exercise Price       December 31, 2001    Contractual Life  Exercise Price
    --------------     ---------------------- ---------------- ----------------
 <S>                   <C>                    <C>              <C>
 $1.47 to $5.60.......       2,457,781              6.03            $ 2.81
 $12.59 to $19.92.....       1,890,650              9.71            $13.30
 $20.06 to $27.81.....       1,033,710              9.05            $26.70
 $28.00 to $97.07.....       1,383,050              8.79            $40.88
                             ---------
                             6,765,191
                             =========
</TABLE>

   The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and applies APB Opinion No. 25 and
related interpretations in accounting for its Plans. If the Company had elected
to recognize compensation expense based on fair value of the options granted at
grant date as prescribed by SFAS No. 123, net loss and loss per share would
have been increased to the pro forma amounts indicated in the table below.

<TABLE>
<CAPTION>
                                                1999      2000      2001
                                              --------  --------  --------
                                                       (Restated)
    <S>                                       <C>       <C>       <C>
    Net income (loss)--as reported........... $(17,031) $  3,061  $ (2,687)
    Net loss--pro-forma...................... $(18,388) $(21,869) $(26,788)
    Income (loss) per share--as reported..... $   (.27) $    .04  $   (.04)
    Loss per share--pro-forma................ $   (.29) $   (.30) $   (.36)
</TABLE>

   The fair value of each option grant is estimated on the date of grant using
the Black Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                              1999     2000     2001
                                             -------  -------  -------
        <S>                                  <C>      <C>      <C>
        Expected dividend yield.............       0%       0%       0%
        Expected stock price volatility.....    99.8%   155.3%  120.10%
        Risk-free interest rate.............     5.5%     5.5%    4.00%
        Expected life of options............ 5 years  5 years  5 years
</TABLE>

9.  Executive Deferred Compensation Plan

   Effective March 31, 1999, the Company instituted an executive deferred
compensation plan to permit certain individuals to defer the gain on the
exercise of stock options to a specified future period. In June 1999, six
individuals deferred the gain on the exercise of options to purchase 1,205,000
shares of the Company's common stock which is included as treasury stock in the
Company's December 31, 2000 and December 31, 2001 consolidated balance sheets.
The Company's executive deferred compensation plan does not permit
diversification and must be settled by the delivery of 1,181,042 shares of the
Company's stock over various periods of time ranging from 12 to 36 months,
which may begin in May 2002. Accordingly, changes in the fair value of the
amount owed to the individuals are not recognized. In 2001 one individual
elected to withdraw early from this plan reducing the balance in treasury stock
by 75,744 shares to 1,129,256 shares and reduce the deferred compensation by
$211.

                                     F-17

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)



10.  Warrants

   On August 4, 1998, certain of the former GenPharm stockholders assigned
their rights to receive $25,123 of the remaining balance of the purchase price
of GenPharm to Bay City Capital ("BCC") Partners. As part of this transaction,
the Company issued to BCC warrants to purchase 909,592 shares of common stock
at an exercise price of $5.00 per share exercisable over a period of seven (7)
years. In 2000, all the BCC warrants were exercised.

11.  Research and Development Agreements

   The Company has a significant number of research and development agreements
related to its discovery and development strategy. The following is a
description of certain of these agreements which have had, or may have, a
significant financial impact.

   On April 26, 1996, the Company announced that it had entered into a
collaboration agreement with Aventis Behring L.L.C. ("Aventis Behring"), a
Delaware limited liability company formed through a joint venture of Hoechst AG
and Rhone-Poulenc Rorer, Inc., to develop and market MDX-33. This collaboration
provides for the joint development of MDX-33 by the Company and Aventis
Behring. Subject to the terms of the arrangement, the Company is primarily
responsible for product development, clinical testing through Phase II trials
and the manufacture of all products used in clinical trials. Aventis Behring is
primarily responsible for the payment of all expenses associated with Phase I
and Phase II clinical trials of MDX-33 to be conducted by the Company, up to a
maximum of $20,000. If such trials are successfully completed, Aventis Behring
will be primarily responsible for Phase III clinical trials, regulatory
approvals, product commercialization and the costs associated therewith. In
addition, under the terms of the arrangement, Aventis Behring paid to the
Company in 1996 an upfront fee of $1,000 which was included in contract and
license revenue and funded research and development of $900 over three years
starting in July of 1996. Aventis Behring may also provide the Company with up
to $10,000 of additional funding upon the achievement of certain milestones. In
1999, 2000 and 2001 the Company recognized $353, $261 and $2,241 in contract
revenue from Aventis Behring, respectively.

   Under the terms of the agreement, Aventis Behring has an option (the
"Option") to purchase shares of Common Stock of the Company in an amount equal
to $2,000, at a premium over the market price for the Common Stock on the
Nasdaq National Market for the three day period commencing one business day
prior to the Company's public announcement that certain milestones have been
achieved, subject to a maximum of 20% of the shares of the Common Stock or
voting power outstanding prior to such issuance. If such milestones have been
achieved and Aventis Behring does not elect to exercise the Option, then
Aventis Behring will be required to pay $2,000 in cash to the Company.

   In February 1997, GenPharm entered into a Research and Commercialization
Agreement with Centocor, Inc. ("Centocor") (now a subsidiary of Johnson &
Johnson). This agreement provides Centocor with a research license in return
for annual license fees. Further, Centocor was granted an option to obtain
exclusive worldwide marketing and manufacturing rights to any antibodies which
are developed under the terms of the agreement contingent upon Centocor making
equity investments in GenPharm (now the Company). Under the terms of the
agreement, in October 1998, Centocor exercised its option by making a $4,000
equity purchase and received 1,800,680 shares of the Company's common stock.
The agreement provides for benchmark payments on the achievement of certain
milestones and royalty payments on product sales. In May 2000, the Company
announced a broad antibody development agreement with Centocor. This new
agreement allows Centocor and other affiliates of Johnson & Johnson to access
the Company's HuMAb-Mouse technology for an unlimited number of targets.

                                     F-18

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

Under the terms of the agreement, the Company received technology access fees,
and could also receive license fees, milestone fees and royalties on product
sales. In 1999, the Company received a $4,000 milestone payment from Centocor.
In 2000 and 2001, the Company recognized revenue of $104 and $150,
respectively, from the new agreement.

   In August 1998, the Company received a $1,200 milestone payment from Merck
KGaA in exchange for 384,000 shares of the Company's common stock. The
milestone payment was triggered by clinical development progress of MDX-447, an
anti-cancer treatment developed jointly by Merck KGaA and Medarex. Merck KGaA
obtained the exclusive option to negotiate for worldwide licensing rights, with
the Company retaining United States rights, in return for an option fee of
$1,500, which was recognized in contract revenue in 1999, and Merck KGaA's
agreement to pay fully for Phase II clinical trials of MDX-447.

   In December 1998, the Company and Novartis entered into a global licensing
arrangement involving the Company's HuMAb-Mouse technology. Under the terms of
the agreement, Novartis obtains the rights to use the HuMAb-Mouse technology
for an unlimited number of targets for up to ten years. Under the terms of the
arrangement, Novartis made an initial equity investment in the Company by
purchasing 1,023,018 shares of common stock for an aggregate purchase price of
$2,000, which represented a premium to the market price on the day of the
transaction. An additional 246,002 shares of the Company's common stock or a
$1,000 equity investment was made in November 1999 the first anniversary of the
agreement. A further $3,000 in equity purchases may be made after the initial
five year term of the agreement. On the fifth anniversary of the agreement,
Novartis may also purchase $2,000 of Medarex common stock at a price equal to
one hundred and ten percent of the average of the closing sales prices of
Medarex's common stock on the Nasdaq National Market, or Nasdaq, on the twenty
consecutive days prior to such anniversary. Additionally, on the sixth
anniversary of the agreement, Novartis may purchase $1,000 of Medarex common
stock at a price equal to one hundred and ten percent of the average of the
closing sales prices of Medarex's common stock on the Nasdaq National Market on
the twenty consecutive days prior such anniversary. In addition, the Company
could receive license fees, milestone payments and royalties on sales of
products made utilizing the HuMAb-Mouse technology.

   In December 1999, the Company entered into a strategic alliance with Kirin
Brewery Co., Ltd., ("Kirin") providing for the global commercialization of
technology for creating fully human monoclonal antibodies. Under the terms of
this alliance, Kirin paid the Company $12,000 in upfront fees in December 1999.
The Company recognized $6,000 as revenue in each of 2000 and 2001, as the
required work was performed. In addition, Kirin was designated as the primary
distributor of the Company's HuMAb-Mouse technology in Asia, and the Company
was designated as the primary distributor of Kirin's TC Mouse outside of Asia.
In addition the Company has exchanged broad licenses with Kirin, subject to
milestone and royalty payments, for in-house use of each other's technology for
the development of human antibody therapeutic products.

   In January 2000, the Company entered into a binding letter of intent with
Scil Biomedicals GmbH ("Scil") for the development of MDX-210, its
antibody-based product for the treatment of cancers over expressing HER-2, for
applications outside cellular therapy. Scil has paid the Company $500, which is
being recognized as revenue over a 36-month period as the related services are
provided.

   In August 2000, the Company entered into an agreement with Scil whereby the
Company transferred certain development and commercialization rights for MDX-RA
to Scil. A Phase III placebo controlled clinical trial of MDX-RA for the
prevention of secondary cataracts was commenced by Medarex in December 1997. In
November 1998, the Company voluntarily suspended the Phase III trial after 565
patients had been treated. The reason for the suspension was the occurrence of
serious adverse events, or SAEs, in seven patients receiving a placebo and six
treated with MDX-RA. At this time, in light of current market conditions
relating to secondary

                                     F-19

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

cataracts and the data from the suspended Phase III trial, it is unlikely that
the Company will resume clinical trials with respect to MDX-RA.

   Scil paid the Company $2,000 in 2000 which is being recognized as revenue
over a 36-month period as the related services are being provided. In 2000 and
2001, the Company recognized revenue of $3,971 and $1,629, respectively,
related to MDX-210 and MDX-RA of which $3,423 and $635, respectively,
represented the funding of research and development and $548 and $994,
respectively, represented the amortization of a portion of license fees. The
Company's collaboration with Scil was terminated in January 2002.

   In February 2000, the Company entered into a binding letter of intent with
Eos to develop and commercialize genomics-derived antibody-based therapeutic
products. The Company also has an agreement with Eos to generate fully human
monoclonal antibodies to several target antigens. Pursuant to the letter of
intent, on May 15, 2000 the Company paid $5,000 to Eos and deposited an
additional $20,000 in a third party escrow account, to be released over time to
Eos upon the achievement of certain milestones. This escrow deposit is included
on the December 31, 2000 balance sheet as segregated cash. In September 2000,
the Company purchased shares of preferred stock of Eos for an aggregate
purchase price of $2,500 which was part of a $27,500 private placement. This
investment is accounted for under the cost method. Dr. Frederick B. Craves, a
member the Company's board of directors, is also a member of the board of
directors of Eos. BCC Acquisition I LLC ("BCC Acquisition"), which beneficially
owns approximately 5.2% of the Company's common stock, is an affiliate of The
Bay City Capital Fund I, L.P. ("BCC Fund"), which owns approximately 15% of the
shares of Eos's capital stock. Dr. Craves is a principal of Bay City Capital
LLC, an affiliate of BCC Fund, which is one of the members of BCC Acquisition.

   In April 2001, the Company and Eos entered into a new binding letter of
intent which superseded the terms of their letter of intent of February 2000.
The collaboration is now structured to more closely resemble the Applied
Genomics collaborations that the Company entered into with other partners
during 2000 and 2001. This restructured agreement allows the Company and Eos to
jointly develop and commercialize fully human monoclonal therapeutic products
to multiple disease targets identified by Eos. The Company plans to generate
antibodies to the Eos targets using its fully human antibody technology. The
Company and Eos expect to share costs and responsibilities leading to the
anticipated commercialization of therapeutic products, including preclinical
and clinical development and marketing efforts. The Company has agreed to
transfer certain of its rights and responsibilities to develop and
commercialize collaboration products outside North America to Genmab. In
exchange, Genmab will be responsible for a portion of the development and
marketing costs associated with the collaboration that would otherwise be borne
by the Company. Under the prior Letter of Intent, Eos had been responsible for
all costs of developing the products through Phase IIa clinical trials, and the
Company has agreed to provide funding to Eos of $25,000, $5,000 of which was
paid to Eos in 2000 and $20,000 of which was deposited into an escrow account
in 2000 and was classified as segregated cash on the Company's balance sheet.
As a result of the restructured agreement, $5,000 plus interest ($279) was
returned to the Company in April 2001, and was recorded in the second quarter
2001 Consolidated Statement of Operations as a $5,000 reduction in research and
development expenses, and the interest received was recorded as interest
income. In addition, the $20,000 that had been deposited into a third-party
escrow account and carried on the Company's balance sheet as segregated cash
was released from such escrow account and returned to the Company and the
$20,000 plus earned interest ($1,042) was reclassed to cash and cash
equivalents in the Company's balance sheet during the second quarter of 2001.
In addition, the $75,000 of credits that Eos would have been able to use
against license fees, milestone payments and royalties that the Company may
otherwise have received under its August 1999 collaboration with Eos has been
eliminated from the restructured collaboration.

                                     F-20

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   In September 2000, the Company entered into a binding memorandum of
understanding with Oxford GlycoSciences plc, ("OGS"), to develop novel
therapeutics produced through the joint application of Medarex's fully human
monoclonal antibody technology and OGS proprietary proteomics technology for
high-throughput protein analysis and target validation. The Company's European
rights to these products are subject to its Collaboration with Genmab (see Note
12). The Company and OGS will share costs and responsibilities leading to the
anticipated commercialization of therapeutic products, including preclinical
and clinical development and marketing efforts. As part of this agreement, the
Company made a $5 million equity investment in OGS. The Company subsequently
sold one half of this equity interest to Genmab for $2.5 million, the Company's
cost for such equity interest (see Note 12). The Company's President and Chief
Executive Officer is a member of the board of directors of OGS.

   In February 2001, the Company entered into a collaboration with Seattle
Genetics, Inc. ("Seattle Genetics") to jointly develop and commercialize fully
human antibody therapeutic products to specific cancer targets identified by
Seattle Genetics. The Company plans to generate antibodies to the Seattle
Genetics targets using its fully human antibody technology. The Company and
Seattle Genetics will share costs and responsibilities leading to the
anticipated commercialization of therapeutic products, including preclinical
and clinical development and marketing efforts. In addition, the Company
purchased $2,000 of common stock directly from Seattle Genetics in connection
with Seattle Genetics' initial public offering in March 2001.

   In February 2001, the Company and Immusol, Inc. ("Immusol"), a privately
held biopharmaceutical company, announced the formation of a strategic alliance
for the development of fully human antibody therapeutic products. The Company
expects to employ its UltiMAb Human Antibody Development System to develop high
affinity, fully human antibodies to therapeutic targets discovered by Immusol's
Inverse Genomics(TM) technology platform. Under the terms of the agreement, the
two companies will share responsibilities leading to the anticipated
commercialization of therapeutic products, including preclinical and clinical
development and marketing efforts. Additionally, the Company has made a $5,000
equity investment in Immusol, which was part of a $108,750 financing.

   In April 2001, the Company entered into a collaboration with Northwest
Biotherapeutics, Inc. ("NWBio") to jointly develop and commercialize fully
human antibody therapeutic products to specific cancer targets identified by
NWBio. The Company plans to generate antibodies to the NWBio targets using its
fully human antibody technology. NWBio will initially contribute four
cancer-related targets to the collaboration, and will contribute four
additional targets to the collaboration over the next four years. The Company
and NWBio expect to share costs and responsibilities leading to the anticipated
commercialization of therapeutic products, including preclinical and clinical
development and marketing efforts. In addition, the Company made a $4,000
equity investment in NWBio, which was part of a $10,000 private placement.

12.  Transactions with Genmab

   In March 1999, the Company and BankInvest Biomedical Development Venture
Fund formed Genmab A/S, a new Danish company established to develop and
commercialize a portfolio of fully human antibodies derived from the Company's
HuMAb-Mouse technology.

   Initially, the Company contributed a license to its human antibody
technology for producing antibodies to particular targets in exchange for
approximately 44% of Genmab's share capital. During Genmab's initial 12 months
of operations, Genmab raised additional equity and, in connection therewith,
the Company agreed to expand the license to provide Genmab with broader rights
to the human antibody technology in exchange for further equity, thereby
maintaining the approximate 44% ownership in Genmab's share capital. In
addition, in

                                     F-21

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

connection with Genmab's private placement in May 2000, the Company made a cash
investment of $18,000 in order to maintain the approximate 44% ownership
interest in Genmab. In August 2000, the Company received additional equity in
connection with the European Genomics Agreement (as described below) which
increased the Company's equity interest in Genmab to approximately 45%.

   In October 2000, Genmab completed an initial public offering ("IPO") of its
ordinary shares and raised approximately $187,000. As a result of Genmab's IPO,
the Company's equity interest in Genmab was reduced to its current level of
approximately 33%. The market value of the investment in Genmab is
approximately $143,500 as of December 31, 2001.

   In August 2000, the Company entered into a binding memorandum of
understanding, or the Genomics Agreement, with Genmab pursuant to which the
Company granted Genmab rights to market the Company's transgenic mouse
technologies for multi-target (five or more targets) genomics partnerships to
certain pharmaceutical and biotechnology companies whose headquarters are
located in Europe. Under the terms of the Genomics Agreement, Genmab may market
the Company's transgenic mouse technology for multi-target partnerships to any
European-based company, or for non-multi-target (less than five targets)
partnerships, to any company worldwide, except for: (i) certain partners of the
Company, including Novartis AG, Merck KGaA, Schering AG, Aventis Behring, IDM
and Scil; and (ii) any European based pharmaceutical company with worldwide
revenues in excess of $1,000,000 in 1999, provided, however, that Genmab may
market the Company's human antibody technology to Sanofi/Synthelabo and
Boehringer Ingelheim. The Company also has the right to participate in Genmab's
multi-target partnerships, thereby sharing in certain costs and commercial
benefits. The Company also has certain rights to develop and commercialize
outside of Europe products arising from such European-based alliances. The
Company retains all rights to market its technology to companies headquartered
outside of Europe and to all companies for non-multi-target partnerships in
Europe. Certain license fees, milestones and royalties due the Company under
the previously existing Agreement between the Company and Genmab were reduced.
The Genomics Agreement also provides that, under certain circumstances, the
Company must negotiate in good faith to manufacture antibodies for such
partnerships.

   In addition, under the terms of the Genomics Agreement, the Company granted
Genmab an option to receive certain rights in Europe with respect to the
development and commercialization of up to four antibody products the Company
may obtain through its alliance with Eos. Finally, the Genomics Agreement
grants Genmab certain rights to access technologies acquired by the Company
from Biosite Incorporated ("Biosite") and Kirin.

   In August 2000, under the Genomics Agreement, the Company received 279,760
shares of Genmab stock valued at $2,000 based upon a recently completed private
placement representing payment for the first year. The Genomics Agreement has
an initial term of five years with a right exercisable by Genmab to extend the
term for an additional two years. For each year of the agreement and during the
term of any extension, the Company will receive $2,000 per year from Genmab. At
Genmab's option, these amounts may be paid in either cash or capital stock.
During the year ended December 31, 2000, the Company recognized $667, and in
2001 $2,000 of revenue from this agreement.

   In September 2000, the Company and Genmab entered into an amended Genomics
Agreement, or the Amended Genomics Agreement, pursuant to which the Company
agreed to assign to Genmab 100% of the Company's economic interests to each
product the Company jointly develops with OGS (a "Medarex/OGS Product") and
sells in Europe and 50% of its economic interest in each Medarex/OGS Product
sold outside North America and Europe. Under the terms of the Amended Genomics
Agreement, if a Medarex/OGS Product is intended to be sold only in Europe,
Genmab will reimburse the Company for 100% of the Company's research,

                                     F-22

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

development, manufacturing and commercialization expenses associated with such
product. If the Medarex/OGS Product is to be sold only in North America, Genmab
will not be obligated to reimburse the Company for any such expenses. In all
other cases, Genmab will reimburse the Company for 50% of such expenses. In
addition, on November 2000, Genmab purchased one-half of the Company's equity
interest in OGS for $2,500.

   In October 2000 Genmab announced the completion of the initial public
offering of its ordinary shares. The global offering consisted of an issue of
6,000,000 new ordinary shares at a price of approximately $33.00 per share
(based on the exchange rate at the time of the global offering) to be delivered
either in the form of ordinary shares for trading on the Copenhagen Stock
Exchange or in the form of Co-Ownership Interests ("COIS") for trading on the
Neuer Market of the Frankfurt Stock Exchange. Each COIS represents one ordinary
share. The issuance of the new ordinary shares resulted in gross proceeds to
Genmab of approximately $187,000. As the result of this offering the Company's
equity investment in Genmab was reduced to approximately 33%. The difference
between the cost of the investment and the amount of the underlying equity in
net assets of Genmab after the initial public offering was accounted for in
accordance with APB Opinion No. 18, The Equity Method of Accounting for
Investment in Common Stock, and SAB No. 51, Accounting for Sales of Stock by a
Subsidiary. This transaction is reflected as an equity transaction in the
accompanying statement of shareholders' equity.

   In December 2001, 88,600 shares of the Company's Genmab stock were awarded
as a bonus to the President of the Company, further reducing the Company's
ownership percentage in Genmab to approximately 32.6% and resulting in
additional non-cash compensation of approximately $1,598 which was offset by
the gain on disposition of Genmab stock of $1,442.

   The Chairman of the Company's board of directors is also on the board of
directors of Genmab. In addition, the President and Chief Executive Officer of
the Company, who is also a member of the board of directors of the Company, and
the President and Chief Executive Officer of Genmab are husband and wife. Until
August 1, 2000, the President and Chief Executive Officer of Genmab was an
executive officer of the Company; she currently has a consulting agreement with
the Company. The Chief Scientific Officer of Genmab also has a consulting
agreement with the Company.

   Summary financial information for Genmab is as follows as of and for the
years ended December 31, 2000 and 2001:

<TABLE>
<CAPTION>
                                               2000      2001
                                            ---------- ---------
                                            (Restated)
              <S>                           <C>        <C>
              Current Assets...............  $223,617  $ 195,709
              Non Current Assets...........    19,007     19,718
              Current Liabilities..........     4,688      8,303
              Non Current Liabilities......     5,084      3,553
              Net Sales....................        --         --
              Gross Profit.................        --         --
              Net Loss.....................    (2,922)   (22,075)
</TABLE>

13.  Transactions with IDM

   In July 2000, the Company entered into an agreement with IDM whereby the
Company licensed to IDM certain of its technologies in exchange for equity
units in IDM. As a result of this transaction, the Company realized a gain from
the transfer of its technology of approximately $40,500 (based upon an
independent

                                     F-23

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)

valuation). In accordance with SAB No. 101, Revenue Recognition in Financial
Statements, the Company will recognize the approximately $40,500 gain as
revenue over a two-year period for financial statement reporting purposes.
During 2000 and 2001, the Company recognized $5,901 and $20,302, respectively,
in revenue from this transaction. The balance of the $40,500 will be recognized
in 2002. For tax reporting purposes, the entire gain on the transfer of
technology was taxable to the Company at the time the transaction was closed in
2000.

   In October 2000, the Company participated in a private placement of IDM and
purchased additional equity of $5,172 which was part of a $41,500 offering by
IDM.

   The Company currently accounts for its interest in IDM under the cost
method. The Company's equity ownership in IDM is 6% and with the closing of the
agreement in September 2000, the Company was issued 7,528 Class B shares and
192,278 units, each unit comprising one Class B share and 19 warrants allowing
each to purchase one convertible or redeemable bond into one Class B share. If
the warrants are exercised and converted or redeemed, the Company would own an
additional 3,653,282 Class B shares of IDM, which would give the Company an
equity interest in IDM of approximately 29%. The warrants are exercisable
between September 2002 and September 2010, for bonds that in turn are
convertible into or redeemable in Class B shares six months after the exercise.

   The Company's President and Chief Executive Officer, who is also a member of
Medarex's board of directors, is also a member of the board of directors of IDM.

14.  Commitments and contingencies

   The Company leases laboratory, production and office space in New Jersey.
These leases expire on various dates between November 2004 and September 2008.
The Company incurred rent expense of $2,768 in 1999, $2,474 in 2000 and $3,077
in 2001.

   The Company has secured a bank letter of credit pursuant to the requirements
of its Annandale, New Jersey lease. This letter of credit in the amount of
$1,300 is fully cash collateralized and the cash is categorized as segregated
cash in the balance sheet.

   Future minimum lease commitments as of December 31, 2001 are as follows:

<TABLE>
              <S>                                          <C>
              2002........................................  2,140
              2003........................................  2,105
              2004........................................  2,038
              2005........................................  1,790
              2006........................................  1,327
              Remainder...................................  2,082
                                                           ------
                                                           11,482
                                                           ======
</TABLE>

   The Company is a party to a number of license agreements which call for
royalties to be paid by the Company if and when the Company commercializes
products utilizing the licensed technology.

                                     F-24

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   The Company has a contingent commitment to pay $1,000 to Essex Chemical
Corporation ("Essex") without interest in installments equal to 20% of net
after tax earnings of the Company in future years. The Company's contingent
commitment, as amended, to pay up to $1,000 out of future earnings may be
satisfied, at the Company's option, through the payment of cash or shares of
the Company's common stock having a fair market value equal to the amount owed,
provided that such shares are registered with the Securities and Exchange
Commission. The Company has accrued $667 related to this liability during 2000,
which remains outstanding at December 31, 2001.

   In November 2000, the Company purchased a facility in Milpitas, California
for $14,600 to expand its animal facility to house the Company's HuMAb-Mice,
research and development laboratories and related administrative offices. The
Company had previously leased this facility.

   In January 2001, the Company purchased a facility and adjacent land in
Bloomsbury, New Jersey to expand its research and development capabilities. The
cost of the Bloomsbury facility including land and building was $9,200. For
2002, the Company expects to spend up to approximately $60,000 on building
modifications and equipping its facilities, but this is subject to change.

   In addition, we have commitments for research funding and the use of a
license for database products of approximately $10,500 in 2002 and
approximately $3,000 per year thereafter through 2008.

   In the ordinary course of our business, the Company is at times subject to
various legal proceedings. We do not believe that any of our current legal
proceedings, individually or in the aggregate, will have a material adverse
effect on our operations or financial condition.

   On May 24, 2000, Lexicon Genetics Incorporated ("Lexicon") filed a complaint
against Deltagen, Inc. in U.S. District Court for the District of Delaware
alleging that Delatgen was willfully infringing the claims of United States
Patent No. 5,789,215, under which Lexicon holds an exclusive license in the
relevant field from our wholly-owned subsidiary GenPharm. This patent covers
certain methods of engineering the animal genome, including certain methods for
the productions of knockout mice.

   On October 31, 2000, Lexicon amended its complaint to add GenPharm, as the
licensor of the patent, as a plaintiff. On November 14, 2000, Deltagen filed an
answer to Lexicon's amended complaint which included counterclaims against
Lexicon and, for the first time, counterclaims against GenPharm. In its
counterclaims, Deltagen sought declaratory relief that the patent was invalid,
unenforceable and not infringed. In addition, Deltagen asserted counterclaims
against both Lexicon and GenPharm under the antitrust laws. Deltagen sought,
among other relief, an award of monetary damages against Lexicon and GenPharm
in an unspecified amount.

   On September 24, 2001, the litigation against GenPharm was dismissed with
prejudice pursuant to a stipulation following a settlement of the underlying
dispute between Lexicon and Deltagen.

15.  Segment Information

   The Company is an integrated monoclonal antibody-based company with antibody
discovery, development and manufacturing capabilities. The operations of the
Company and its wholly-owned subsidiaries constitute one business segment.

                                     F-25

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


   Revenue from customers representing 10% or more of total revenues for the
years ended December 31, 1999, 2000 and 2001 is as follows:

<TABLE>
<CAPTION>
             Customer                                1999 2000 2001
             --------                                ---- ---- ----
             <S>                                     <C>  <C>  <C>
             IDM....................................  --   27%  48%
             Kirin..................................  --   27%  14%
             Genmab.................................  --   11%  12%
             Scil...................................  --   18%   4%
             Centocor...............................  40%  --   --
             Merck KGaA.............................  31%  --   --
</TABLE>

   No other single customer accounted for more than 10% of the Company's total
revenues for the years ended December 31, 1999, 2000 and 2001, respectively.

16.  Employee Savings Plan

   The Company maintains a 401(k) savings plan. Employees may contribute up to
15% of their annual salaries. The Company may make matching contributions of up
to 4% of a participant's annual salary. During 1999, 2000 and 2001, the Company
made contributions to the plan totaling $77, $116 and $192, respectively.

17.  Quarterly Financial Information--Unaudited

   The following is a summary of the quarterly results of operations for the
years ended December 31, 2000 and 2001.

<TABLE>
<CAPTION>
2000                                                 First     Second     Third      Fourth     Total
----                                                -------  ---------- ---------- ---------- ----------
                                                             (Restated) (Restated) (Restated) (Restated)
<S>                                                 <C>      <C>        <C>        <C>        <C>
Sales.............................................. $    55   $    58    $    37    $ 1,138    $  1,288
Contract and license revenues......................   2,078     3,051      5,637     10,403      21,169
                                                    -------   -------    -------    -------    --------
   Total revenue...................................   2,133     3,109      5,674     11,541      22,457
Cost of sales......................................      27        27         29      1,106       1,189
Income (loss) before provision (benefit) for income
  taxes............................................  (4,175)   (5,410)     1,166     (1,595)    (10,014)
Net income (loss)..................................  (4,325)   (5,560)    (2,899)    15,845       3,061
Basic net income (loss) per share.................. $ (0.06)  $ (0.08)   $ (0.04)   $  0.22    $   0.04
Diluted net income (loss) per share................ $ (0.06)  $ (0.08)   $ (0.04)   $  0.22    $   0.04

2001                                                 First     Second     Third      Fourth     Total
----                                                -------  ---------- ---------- ---------- ----------
Sales.............................................. $    66   $   190    $   623    $   253       1,132
Contract and license revenues......................   8,854     8,023     10,833     13,462      41,172
                                                    -------   -------    -------    -------    --------
   Total revenue...................................   8,920     8,213     11,456     13,715      42,304
Cost of sales......................................      28       106        361        147         642
Income (loss) before provision (benefit) for income
  taxes............................................   3,423     4,485     (2,534)    (7,461)     (2,087)
Net income (loss)..................................   3,273     4,335     (2,684)    (7,611)     (2,687)
Basic net income (loss) per share.................. $  0.04   $  0.06    $ (0.04)   $ (0.10)   $  (0.04)
Diluted net income (loss) per share................ $  0.04   $  0.06    $ (0.04)   $ (0.10)   $  (0.04)
</TABLE>

                                     F-26

<PAGE>

                        MEDAREX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       December 31, 1999, 2000 and 2001
                   (Dollars in thousands, except share data)


18.  Subsequent Events

   In January 2002, the Company entered into a collaboration with Tularik, Inc.
("Tularik") to jointly develop and commercialize fully human antibody
therapeutic products to specific cancer targets identified by Tularik. The
Company plans to generate antibodies to the Tularik targets using its fully
human antibody technology. Tularik will contribute three cancer-related targets
to the collaboration. The Company and Tularik each expect to assume certain
costs and responsibilities leading to the anticipated commercialization of
therapeutic products, including preclinical and clinical development and
marketing efforts. In addition, the Company made an equity investment in
Tularik.

   In January 2002, the Company and Scil terminated their collaboration related
to the development of MDX-210 and MDX-RA for all applications. The Company has
no remaining obligations to Scil under the Development and Collaboration
License Agreement with Scil or any other agreement.

                                     F-27

<PAGE>

                               AUDITORS' REPORT

                       Report of Independent Accountants

To the Board of Directors and Shareholders of
  Genmab A/S:

   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Genmab A/S
and its subsidiaries (a development stage enterprise) at December 31, 2001 and
December 31, 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001 and,
cumulatively, for the period from June 11, 1998 (date of inception) to December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

   Prior to fiscal year 2001, the Company prepared its financial statements in
accordance with accounting principles generally accepted in Denmark. In
addition, the financial statements for such prior years included a footnote
disclosing the affect of the application of accounting principles generally
accepted in the United States on the determination of the Company's
consolidated net loss for each of the periods presented therein. As discussed
in note 19 to the financial statements, the Company has restated its previously
reported net loss for fiscal year 2000 to conform with accounting principles
generally accepted in the United States.

                                          PRICEWATERHOUSECOOPERS



                                          Jen Roder
                                          State Authorized Public Accountant

Copenhagen,
February 10, 2002

                                     F-28

<PAGE>

                   Genmab A/S (A development stage company)

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            December 31,   December 31, December 31,
                                                       Note     2001           2001         2000
                                                       ---- -------------  ------------ -------------
                                                                DKK            USD          DKK
                                                                           (Unaudited)
<S>                                                    <C>  <C>            <C>          <C>
                      ASSETS
Current assets:
   Cash and cash equivalents..........................        165,860,678   19,723,013     38,240,634
   Marketable securities..............................   6  1,433,373,714  170,446,961  1,726,804,593
   Other current assets...............................         46,581,921    5,539,201     28,114,758
                                                            -------------  -----------  -------------
       Total current assets...........................      1,645,816,313  195,709,175  1,793,159,985
Non-current assets:
   Plant and equipment................................   7     50,752,377    6,035,125      4,427,946
   Other securities and equity interests..............  10     15,689,222    1,865,655     21,504,739
   Licenses and rights................................   8     95,097,233   11,308,310    125,594,082
   Deposits and other assets..........................          4,277,373      508,635      1,378,959
                                                            -------------  -----------  -------------
       Total non-current assets.......................        165,816,205   19,717,725    152,905,726
                                                            -------------  -----------  -------------
       Total Assets...................................      1,811,632,518  215,426,900  1,946,065,711
                                                            -------------  -----------  -------------

       LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current liabilities:
   Trade accounts payable.............................         28,274,600    3,362,221     13,769,536
   Accrued liabilities................................         25,332,483    3,012,365      8,754,538
   Short-term portion of payable technology rights....  11     16,220,260    1,928,802     15,174,535
                                                            -------------  -----------  -------------
       Total current liabilities......................         69,827,343    8,303,388     37,698,609
Long-term liabilities:
   Long-term portion of payable technology rights.....  11     29,875,590    3,552,600     40,780,334
                                                            -------------  -----------  -------------
       Total Liabilities..............................         99,702,933   11,855,988     78,478,943
Commitment and contingencies                            17
Shareholders' Equity:
   Common stock, DKK 1.00 par value, 21,812,020
     shares authorized, issued and outstanding at
     December 31, 2001 and December 31, 2000..........  12     21,812,020    2,593,736     21,812,020
   Share Premium......................................      1,931,797,202  229,716,059  1,921,790,614
   Deficit accumulated during development stage.......       (241,679,637) (28,738,883)   (76,015,866)
                                                            -------------  -----------  -------------
       Total Shareholders' Equity.....................      1,711,929,585  203,570,912  1,867,586,768
                                                            -------------  -----------  -------------
       Total Liabilities and Shareholders' Equity.....      1,811,632,518  215,426,900  1,946,065,711
                                                            -------------  -----------  -------------
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-29

<PAGE>

                   Genmab A/S (A development stage company)

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                  12 months     12 months    12 months    12 months
                                                    ended         ended        ended        ended
                                                 December 31,  December 31, December 31, December 31, Total since
                                            Note     2001          2001         2000         1999      inception
                                            ---- ------------  ------------ ------------ ------------ ------------
                                                     DKK           USD          DKK          DKK          DKK
                                                               (Unaudited)
<S>                                         <C>  <C>           <C>          <C>          <C>          <C>
Costs and expenses:
   Research and development costs..........       194,204,783   23,093,499   62,680,838   16,690,787   273,576,408
   General and administrative expenses.....        53,443,166    6,355,094   22,424,312    3,371,136    79,242,614
                                                 ------------  -----------  -----------  -----------  ------------
   Total costs and expenses................       247,647,949   29,448,593   85,105,150   20,061,923   352,819,022
                                                 ------------  -----------  -----------  -----------  ------------
      Operating loss.......................      (247,647,949) (29,448,593) (85,105,150) (20,061,923) (352,819,022)
Interest income............................  3    106,827,693   12,703,216   62,665,011    1,003,411   170,496,457
Interest expense...........................  4    (44,811,663)  (5,328,695)  (2,133,057)      (3,652)  (46,948,372)
                                                 ------------  -----------  -----------  -----------  ------------
      Loss before provision for income
       taxes...............................      (185,631,919) (22,074,072) (24,573,196) (19,062,164) (229,270,937)
Provision for income taxes.................  5          4,634          552            0            0         4,634
                                                 ------------  -----------  -----------  -----------  ------------
      Net loss.............................      (185,636,553) (22,074,624) (24,573,196) (19,062,164) (229,275,571)
                                                 ------------  -----------  -----------  -----------  ------------
Basic and diluted net loss per share.......              (8.5)        (1.0)        (1.8)        (3.5)
                                                 ------------  -----------  -----------  -----------
Weighted average number of shares
 outstanding during the year--basic and
 diluted...................................        21,812,020   21,812,020   13,939,629    5,490,620
                                                 ------------  -----------  -----------  -----------
</TABLE>



   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-30

<PAGE>

                   Genmab A/S (A development stage company)

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                     For the year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                                          Accumulated other
                                                                                                         comprehensive income
                                                                                                       -----------------------
                                                                              Deficit
                                                                            accumulated                Unrealized
                                                                              during                     gains/     Cumulative
                                         Number      Share        Share     development     Unearned   (losses) on  translation
                                        of shares   Capital      Premium       stage      compensation securities   adjustments
                                        ---------- ---------- ------------- ------------  ------------ -----------  -----------
                                                      DKK          DKK          DKK           DKK          DKK          DKK

<S>                                     <C>        <C>        <C>           <C>           <C>          <C>          <C>
December 31, 2000...................... 21,812,020 21,812,020 1,921,790,614  (43,639,018) (13,161,470) (19,215,205)     (173)
Expenses related to share issues.......                              58,287
Adjustment of value of warrants granted                           9,948,301                (9,948,301)
Expense recognized for warrants granted                                                    10,047,225
Loss for the period....................                                     (185,636,553)
Other comprehensive income:
 Translations gains and (losses).......                                                                                3,630
 Unrealized loss on marketable
  securities...........................                                                                 (1,520,251)
 Unrealized gain on exchange rate of
  marketable securities................                                                                 21,390,479

 Comprehensive loss....................
                                        ---------- ---------- ------------- ------------  -----------  -----------     -----
December 31, 2001...................... 21,812,020 21,812,020 1,931,797,202 (229,275,571) (13,062,546)     655,023     3,457
                                        ---------- ---------- ------------- ------------  -----------  -----------     -----
</TABLE>
<TABLE>
<CAPTION>






                                        Shareholders'  Shareholders'
                                           equity         equity
                                        -------------  -------------
                                             DKK            USD
                                                        (unaudited)
<S>                                     <C>            <C>
December 31, 2000...................... 1,867,586,768   222,080,595
Expenses related to share issues.......        58,287         6,932
Adjustment of value of warrants granted             0             0
Expense recognized for warrants granted    10,047,225     1,194,747
Loss for the period....................  (185,636,553)  (22,074,624)
Other comprehensive income:
 Translations gains and (losses).......         3,630           431
 Unrealized loss on marketable
  securities...........................    (1,520,251)     (180,778)
 Unrealized gain on exchange rate of
  marketable securities................    21,390,479     2,543,609
                                        -------------   -----------
 Comprehensive loss....................  (165,762,695)  (19,711,362)
                                        -------------   -----------
December 31, 2001...................... 1,711,929,585   203,570,912
                                        -------------   -----------
</TABLE>



   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-31

<PAGE>

                   Genmab A/S (A development stage company)

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                     For the year ended December 31, 2000

<TABLE>
<CAPTION>



                                                                                  Deficit
                                                                                accumulated
                                                                                  during
                                            Number      Share        Share      development    Unearned
                                           of shares   Capital      Premium        stage     compensation
                                           ---------- ---------- -------------  -----------  ------------
                                                         DKK          DKK           DKK          DKK

<S>                                        <C>        <C>        <C>            <C>          <C>
December 31, 1999.........................    671,692    671,692   103,748,808  (19,065,822)  (4,488,750)
Issuance of shares for cash...............    742,120    742,120   356,658,224
Issuance of shares for licenses...........    164,250    164,250    45,387,991
Exercise of warrants......................      3,140      3,140     1,019,558
Expenses and foreign currency fluctuations
 related to share issues..................                          (3,716,720)
Issuance of bonus shares.................. 14,230,818 14,230,818   (14,230,818)
Issuance of shares at initial public
 offering.................................  6,000,000  6,000,000 1,553,689,095
Expenses related to initial public
 offering.................................                        (138,603,873)
Value of warrants granted.................                          17,838,349               (17,838,349)
Expensed value of warrants granted........                                                     4,676,879
Expensed value of transaction entered into
 by principal shareholder on Company's
 behalf...................................                                                     4,488,750
Loss for the period.......................                                      (24,573,196)
Other comprehensive income:
 Translations gains and (losses)..........
 Unrealized gain on marketable
  securities..............................
 Unrealized loss on exchange rate of
  marketable securities...................

 Comprehensive loss.......................
                                           ---------- ---------- -------------  -----------  -----------
 December 31, 2000........................ 21,812,020 21,812,020 1,921,790,614  (43,639,018) (13,161,470)
                                           ---------- ---------- -------------  -----------  -----------
</TABLE>
<TABLE>
<CAPTION>
                                              Accumulated other
                                             comprehensive income
                                           -----------------------

                                           Unrealized
                                             gains/     Cumulative
                                           (losses) on  translation Shareholders'  Shareholders'
                                           securities   adjustments    equity         equity
                                           -----------  ----------- -------------  -------------
                                               DKK          DKK          DKK            USD
                                                                                    (unaudited)
<S>                                        <C>          <C>         <C>            <C>
December 31, 1999.........................           0        0        80,865,928     9,616,021
Issuance of shares for cash...............                            357,400,344    42,499,595
Issuance of shares for licenses...........                             45,552,241     5,416,760
Exercise of warrants......................                              1,022,698       121,612
Expenses and foreign currency fluctuations
 related to share issues..................                             (3,716,720)     (441,967)
Issuance of bonus shares..................                                      0             0
Issuance of shares at initial public
 offering.................................                          1,559,689,095   185,467,518
Expenses related to initial public
 offering.................................                           (138,603,873)  (16,481,821)
Value of warrants granted.................                                      0             0
Expensed value of warrants granted........                              4,676,879       556,142
Expensed value of transaction entered into
 by principal shareholder on Company's
 behalf...................................                              4,488,750       533,771
Loss for the period.......................                            (24,573,196)   (2,922,076)
Other comprehensive income:
 Translations gains and (losses)..........                 (173)             (173)          (21)
 Unrealized gain on marketable
  securities..............................   3,615,362                  3,615,362       429,914
 Unrealized loss on exchange rate of
  marketable securities................... (22,830,567)               (22,830,567)   (2,714,853)
                                                                    -------------   -----------
 Comprehensive loss.......................                            (43,788,574)   (5,207,036)
                                           -----------     ----     -------------   -----------
 December 31, 2000........................ (19,215,205)    (173)    1,867,586,768   222,080,595
                                           -----------     ----     -------------   -----------
</TABLE>



   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-32

<PAGE>

                   Genmab A/S (A development stage company)

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                     For the year ended December 31, 1999

<TABLE>
<CAPTION>
                                                                                                            Accumulated other
                                                                                                          comprehensive income
                                                                                                         -----------------------
                                                                                 Deficit
                                                                               accumulated               Unrealized
                                                                                 during                    gains/    Cumulative
                                                Number of  Share     Share     development    Unearned   (losses) on translation
                                                 shares   Capital   Premium       stage     compensation securities  adjustments
                                                --------- ------- -----------  -----------  ------------ ----------- -----------
                                                            DKK       DKK          DKK          DKK          DKK         DKK

<S>                                             <C>       <C>     <C>          <C>          <C>          <C>         <C>
December 31, 1998..............................  125,000  125,000           0       (3,658)           0       0           0
Issuance of shares for cash....................  273,346  273,346  49,126,654
Issuance of shares for licenses................  273,346  273,346  49,126,654
Expenses and foreign currency fluctuations
 related to share issues.......................                      (174,500)
Transaction entered into by principal
 shareholder on Company's behalf...............                     5,670,000                (5,670,000)
Expensed portion of transaction entered into by
 principal shareholder on Company's behalf.....                                               1,181,250
Loss for the period............................                                (19,062,164)
                                                 -------  ------- -----------  -----------   ----------       -           -
December 31, 1999..............................  671,692  671,692 103,748,808  (19,065,822)  (4,488,750)      0           0
                                                 -------  ------- -----------  -----------   ----------       -           -
</TABLE>
<TABLE>
<CAPTION>






                                                Shareholders' Shareholders'
                                                   equity        equity
                                                ------------- -------------
                                                     DKK           USD
                                                               (unaudited)
<S>                                             <C>           <C>
December 31, 1998..............................      121,342       14,429
Issuance of shares for cash....................   49,400,000    5,874,309
Issuance of shares for licenses................   49,400,000    5,874,309
Expenses and foreign currency fluctuations
 related to share issues.......................     (174,500)     (20,750)
Transaction entered into by principal
 shareholder on Company's behalf...............            0            0
Expensed portion of transaction entered into by
 principal shareholder on Company's behalf.....    1,181,250      140,466
Loss for the period............................  (19,062,164)  (2,266,742)
                                                 -----------   ----------
December 31, 1999..............................   80,865,928    9,616,021
                                                 -----------   ----------
</TABLE>



   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-33

<PAGE>

                   Genmab A/S (A development stage company)

             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

      For the period from inception (June 11, 1998) to December 31, 2001

<TABLE>
<CAPTION>
                                                                                                 Accumulated other
                                                                                               comprehensive income
                                                                     Deficit                  -----------------------
                                                                   accumulated                Unrealized
                                                                     during                     gains/    Cumulative
                               Number      Share        Share      development     Unearned   (losses) on translation
                              of shares   Capital      Premium        stage      compensation securities  adjustments
                              ---------- ---------- -------------  -----------   ------------ ----------- -----------
                                            DKK          DKK           DKK           DKK          DKK         DKK

<S>                           <C>        <C>        <C>            <C>           <C>          <C>         <C>
June 11, 1998................    125,000    125,000             0             0            0           0         0
Issuance of shares for
 cash........................  1,015,466  1,015,466   405,784,878
Issuance of shares for
 licenses....................    437,596    437,596    94,514,645
Exercise of warrants.........      3,140      3,140     1,019,558
Expenses and foreign
 currency fluctuations
 related to share issues.....                          (3,891,220)
Issuance of bonus
 shares...................... 14,230,818 14,230,818   (14,230,818)
Issuance of shares at initial
 public offering.............  6,000,000  6,000,000 1,553,689,095
Expenses related to initial
 public offering.............                        (138,545,586)
Value of warrants............                          27,786,650                (27,786,650)
Expensed value of
 warrants....................                                                     14,724,104
Transaction entered into by
 principal shareholder on
 Company's behalf............                           5,670,000                 (5,670,000)
Expensed portion of
 transaction entered into by
 principal shareholder on
 Company's behalf............                                                      5,670,000
Loss for the period..........                                      (229,275,571)
Other comprehensive
 income:
  Translation gains and
   (losses)..................                                                                                3,457
  Unrealized gain on
   marketable
   securities................                                                                  2,095,111
  Unrealized exchange rate
   loss on marketable
   securities................                                                                 (1,440,088)

  Comprehensive loss.........
                              ---------- ---------- -------------  ------------  -----------  ----------     -----
December 31, 2001............ 21,812,020 21,812,020 1,931,797,202  (229,275,571) (13,062,546)    655,023     3,457
                              ---------- ---------- -------------  ------------  -----------  ----------     -----
</TABLE>
<TABLE>
<CAPTION>





                              Shareholders'  Shareholders'
                                 equity         equity
                              -------------  -------------
                                   DKK            USD
                                              (unaudited)
<S>                           <C>            <C>
June 11, 1998................       125,000        14,864
Issuance of shares for
 cash........................   406,800,344    48,373,904
Issuance of shares for
 licenses....................    94,952,241    11,291,069
Exercise of warrants.........     1,022,698       121,612
Expenses and foreign
 currency fluctuations
 related to share issues.....    (3,891,220)     (462,717)
Issuance of bonus
 shares......................             0             0
Issuance of shares at initial
 public offering............. 1,559,689,095   185,467,518
Expenses related to initial
 public offering.............  (138,545,586)  (16,474,890)
Value of warrants............             0             0
Expensed value of
 warrants....................    14,724,104     1,750,889
Transaction entered into by
 principal shareholder on
 Company's behalf............             0             0
Expensed portion of
 transaction entered into by
 principal shareholder on
 Company's behalf............     5,670,000       674,237
Loss for the period..........  (229,275,571)  (27,263,877)
Other comprehensive
 income:
  Translation gains and
   (losses)..................         3,457           411
  Unrealized gain on
   marketable
   securities................     2,095,111       249,137
  Unrealized exchange rate
   loss on marketable
   securities................    (1,440,088)     (171,245)
                              -------------   -----------
  Comprehensive loss.........  (228,617,091)  (27,185,574)
                              -------------   -----------
December 31, 2001............ 1,711,929,585   203,570,912
                              -------------   -----------
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-34

<PAGE>

                   Genmab A/S (A development stage company)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                       12 months      12 months      12 months      12 months
                                                         ended          ended          ended          ended
                                                      December 31,   December 31,   December 31,   December 31,  Total since
                                                          2001           2001           2000           1999       inception
                                                     --------------  ------------  --------------  ------------ --------------
                                                          DKK            USD            DKK            DKK           DKK
                                                                     (Unaudited)
<S>                                                  <C>             <C>           <C>             <C>          <C>
Operating activities:
Net loss............................................   (185,636,553)  (22,074,624)    (24,573,196) (19,062,164)   (229,275,571)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
   Depreciation.....................................      3,975,476       472,736         609,401       31,778       4,616,655
   Amortization.....................................     30,496,849     3,626,476      19,156,499    7,733,689      57,387,037
   Non-cash interest expense reversed...............     17,409,252     2,070,189       1,065,008            0      18,474,261
   Cash interest received/non-cash interest
    reversed........................................      3,916,350       465,705     (17,744,634)    (525,387)    (14,353,671)
   Paid technology rights...........................    (16,912,200)   (2,011,083)              0            0     (16,912,200)
   Expensed value of warrants granted...............     10,047,225     1,194,747       4,676,879            0      14,724,103
   Other non-cash transactions......................              0             0       4,488,750    1,181,250       5,670,000
Changes in operating assets and liabilities, net of
 acquisition:
   Other current assets.............................    (18,467,161)   (2,195,988)    (15,414,854)  (1,243,972)    (35,125,987)
   Trade accounts payable...........................     14,505,064     1,724,843      11,672,902    2,096,634      28,274,600
   Accrued liabilities..............................     17,442,191     2,074,105       7,356,098      329,432      25,131,721
                                                     --------------  ------------  --------------  -----------  --------------
      Net cash used in operating activities.........   (123,223,507)  (14,652,894)     (8,707,147)  (9,458,740)   (141,389,052)

Investing activities:
   Deposits on leasehold............................     (2,898,414)     (344,659)     (1,145,059)    (233,900)     (4,277,373)
   Purchase of plant and equipment..................    (50,299,907)   (5,981,320)     (4,518,565)    (550,560)    (55,369,032)
   Investments in other securities and equity
    interests.......................................     (8,411,406)   (1,000,227)    (21,504,739)           0     (29,916,145)
   Purchase of marketable securities................ (2,954,920,723) (351,378,884) (1,740,783,042)           0  (4,695,703,765)
   Sales of marketable securities...................  3,267,315,714   388,526,751               0            0   3,267,315,714
                                                     --------------  ------------  --------------  -----------  --------------
      Net cash provided by (used in) investing
       activities...................................    250,785,264    29,821,661  (1,767,951,405)    (784,460) (1,517,950,601)

Financing activities:
   Cash received from sales of stock, net...........         58,287         6,932   1,774,768,846   49,225,500   1,824,177,633
   Warrants exercised by principal shareholders.....              0             0       1,022,698            0       1,022,698
                                                     --------------  ------------  --------------  -----------  --------------
      Net cash provided by financing
       activities...................................         58,287         6,932   1,775,791,544   49,225,500   1,825,200,331
                                                     --------------  ------------  --------------  -----------  --------------
      Net increase (decrease) in cash and cash
       equivalents..................................    127,620,044    15,175,699        (867,008)  38,982,300     165,860,678
      Cash and cash equivalents at beginning of
       period.......................................     38,240,634     4,547,314      39,107,642      125,342               0
                                                     --------------  ------------  --------------  -----------  --------------
   Cash and cash equivalents at end of Period.......    165,860,678    19,723,013      38,240,634   39,107,642     165,860,678
                                                     --------------  ------------  --------------  -----------  --------------
Supplemental schedule of non-cash contributions:
Acquisitions of licenses and rights.................              0             0      57,532,029            0      57,532,029
                                                     --------------  ------------  --------------  -----------  --------------
Liabilities assumed.................................              0             0     (57,532,029)           0     (57,532,029)
                                                     --------------  ------------  --------------  -----------  --------------
Assets acquired.....................................              0             0      45,552,241   49,400,000      94,952,241
                                                     --------------  ------------  --------------  -----------  --------------
Shares issued for licenses and rights contributed...              0             0     (45,552,241) (49,400,000)    (94,952,241)
                                                     --------------  ------------  --------------  -----------  --------------
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                     F-35

<PAGE>

                   Genmab A/S (A development stage company)

                       NOTES TO THE FINANCIAL STATEMENTS

1.  Accounting policies

   Basis of presentation

   The financial statements are reported in Danish Kroner (DKK) and are
prepared in accordance with Generally Accepted Accounting Principles in The
United States (US GAAP). Prior to 2001 the Company has not prepared financial
statements in accordance with US GAAP. Instead the Company prepared a
reconciliation from Danish Generally Accepted Accounting Principles (Danish
GAAP) to US GAAP in the financial statements. A reconciliation from US GAAP to
Danish GAAP is described in footnote 19.

   Consolidated Financial Statements

   The consolidated financial statements comprise the parent company, Genmab
A/S, and subsidiaries in which Genmab A/S controls more than 50% of the voting
rights or otherwise has a controlling interest. The consolidated financial
statements consist of Genmab A/S, Genmab B.V., Genmab, Inc., and Genmab Ltd
(Genmab Consolidated), and they are prepared based on the parent company and
subsidiaries' financial statements by aggregation of similar financial
statement items.

   The financial statements used for the consolidation have been prepared using
the accounting policies of the group. For the consolidation, intercompany
income and expenses, intercompany accounts and gains and losses on transactions
between the consolidated entities are eliminated. In the consolidated financial
statements, the booked value of the equity interest in the consolidated
subsidiaries is eliminated with the parent company's share of the subsidiaries'
equity and incorporated in the shareholders' equity.

   Foreign currency translation

   The Company holds certain cash and cash equivalents as well as short-term
investments denominated in foreign currencies, which are translated into Danish
Kroner at the exchange rate prevailing at the balance sheet date. Receivables,
debt and other items in other foreign currencies, which are not settled at the
balance sheet date, are translated at the exchange rate prevailing at the
balance sheet date. During the year, transactions in foreign currencies are
translated at the exchange rates prevailing on the date of transaction. The
resulting realized and unrealized gains and losses are reported as financial
gains or expenses in the statement of operations.

   At the translation of the financial statements of foreign subsidiaries, the
income statements are translated at the average exchange rate for the year,
while all items in the balance sheets are translated using the exchange rate
prevailing at the balance sheet date. Exchange rate fluctuations, arising from
the translation of the equity of foreign subsidiaries at the beginning of the
year, and adjustments of foreign exchange rate fluctuations arising from the
translation of the income statements of foreign subsidiaries at the average
exchange rate of the year, are recorded on shareholders' equity as part of
Accumulated Other Comprehensive Income.

   Research and development costs

   Research and development costs include salaries and related compensation
expenses, license fees, production costs, amortization of licenses and rights
and depreciation of plant and equipment. Costs are expensed in the period in
which they are incurred.


                                     F-36

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   General and administration costs

   General and administration costs consist primarily of salaries and related
compensation expenses, office facilities, travel and other expenses relating to
general management, financial, administrative and business development
activities including depreciation of plant and equipment.

   Financial items

   Financial income and expenses include interest as well as realized exchange
adjustments. Realized gains on marketable securities are included in the
financial income. Realized losses on marketable securities are included in the
financial expenses. Imputed interest is calculated on zero coupon securities
and included in the financial income. Unrealized gains and unrealized losses on
marketable securities are taken to unrealized gain on securities in
shareholders' equity and are not available for distribution.

   Stock-based compensation

   The Company applies the intrinsic value method when accounting for
stock-based compensation of employees and in addition discloses the pro forma
effects on net loss and net loss per share had the estimated fair value of the
warrants granted to employees been expensed. For fixed awards granted to
employees, the intrinsic value of the award is recognized as an expense using a
straight-line method over the period the services are rendered. The estimated
fair value of warrants granted to non-employees is expensed when service is
performed.

   Income taxes

   Income taxes are accounted for using the liability method which requires the
recognition of deferred tax assets or liabilities for the temporary differences
between the financial reporting and tax bases of the Company's assets and
liabilities and for tax carry-forwards at current statutory rates in effect for
the years in which the differences are expected to reverse. Deferred tax assets
are evaluated and reduced to the amount expected to be realized. Deferred tax
liabilities and assets are stated at the basis of the current tax rate of 30%.

   Net loss per share

   Basic net loss per share is computed using loss for the year and the
weighted average number of ordinary shares outstanding.

   Diluted net loss per share is computed using the weighted-average number of
ordinary shares and dilutive share equivalents outstanding during the period.On
August 25, 2000, the Company's shareholders approved a bonus share issue of
nine ordinary shares for each ordinary share then outstanding.

   The weighted average number of common shares outstanding for computing
diluted net loss per share, including dilutive warrants, was 21,812,020;
13,939,629 and 5,490,620 for the years ended December 31, 2001; 2000 and 1999,
respectively. For the years ended December 31, 2001, 2000, and 1999
respectively, approximately 3,428,300; 2,314,000, and 0 shares attributable to
warrants were excluded from the calculation of diluted net loss per share
because the effect was anti-dilutive. As of December 31, 2000 and 1999 no
warrants were vested. No adjustments were made to reported net income for
computation of net loss per share.

   Per share data in the accompanying statements of operations have been
retro-actively restated in the comparative figures giving effect to the bonus
share issue (in a manner similar to a stock split) for comparative figures.

                                     F-37

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   Cash and cash equivalents

   Time deposits and notes with a maturity of three months or less at the date
of deposit/investment are considered to be cash equivalents.

   Marketable securities

   Marketable securities consist of investments in securities with a maturity
of greater than three months at the time of purchase. The Company invests its
cash in deposits with major financial institutions, money market funds,
corporate bonds and DKK denominated notes issued by the Danish Government and
USD denominated notes issued by the US Government. The investments can be
readily purchased and sold using established markets. When sold, the cost of
marketable securities is determined based on the first-in-first-out principle
plus imputed interest on zero coupon-securities.

   The Company's investments are characterized as available-for-sale marketable
securities and carried at their market value, with unrealized gains and losses
(including unrealized exchange rate gains and losses) reported as part of
comprehensive income.

   Plant and equipment

   Plant and equipment include office equipment, furniture, fixture and
leasehold improvements, which are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives, which range
from three to five years. Leasehold improvements are amortized using the
straight-line method over the useful life of the asset or the related lease
term, whichever is shorter.

   Items costing less than DKK 9,800 are expensed in the relevant financial
year. Depreciation as well as profit and loss in connection with the
replacement of tangible fixed assets are expensed as research and development
expenses and general and administrative costs, respectively.

   Costs associated with the design and building of a manufacturing facility
are capitalized until completion. Upon completion, costs will be depreciated
over the building's expected useful life.

   Other securities and equity interests

   Other securities and equity interests, acquired for long-term strategic
holding, are considered fixed financial assets. These investments are accounted
for in accordance with SFAS 115 "Accounting for Certain Investments in Debt and
Equity Securities". The treatment of these securities is the same as marketable
securities.

   Licenses and rights

   Licenses and rights, which include technology licenses and licenses to
targets, are recorded at cost, and net present value for any remaining
payments. Net present value of the remaining payments is included in the
liabilities, and allocated in short-term and long-term payable technology
rights. The licenses are being amortized using the straight-line method over an
estimated useful life of five years.

                                     F-38

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   Impairment of long-lived assets

   In addition to applying amortization on licenses and rights and depreciation
on plant and equipment, management periodically reviews long-lived assets
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If factors indicate that an asset should be
evaluated for possible impairment, management compares estimated undiscounted
future cash flows from the related asset to the carrying amount of the asset.
If the carrying amount of the asset is greater than undiscounted future cash
flow, an impairment loss would be recognized. Any impairment loss would be
computed as the excess of the carrying amount of the asset over the estimated
fair value of the asset (calculated based on discounting estimated all future
cash flows).

   Use of Estimates

   The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenue and expenses during the
reporting period. Estimates are used for, but not limited to, the accounting
for useful lives of plant and equipment and intangible assets, taxes, and
contingencies. Actual results could differ from these estimates.

   Segment information

   Genmab A/S is managed and operated as one business. The entire business is
managed by a single management team that reports to the Chief Executive
Officer. Separate lines of business or separate business entities with respect
to any of the product candidates are not recognized. Accordingly, the Company
does not prepare discrete financial information with respect to separate
product areas or by location and does not have separately reportable segments.

   Currencies

   The Company's financial statements are published in Danish Kroner. Solely
for the convenience of the reader, the financial statements contain
translations of certain Danish Kroner amounts into U.S. Dollars (USD) at
specified rates. These translations should not be construed as representations
that the Danish Kroner amounts actually represent such USD amounts or could be
converted into USD at the rates indicated or at any other rate.

   Unless otherwise indicated, translations herein of financial information
into USD have been made using the Danish Central Bank closing spot rate on
December 31, 2001, which was USD 1.00 = DKK 8.4095.

   New accounting pronouncements

   In June 2001, the FASB issued SFAS No. 141 "Business Combinations". This
addresses financial accounting and reporting for business combinations. The
provisions of this statement apply to all business combinations initiated after
June 30, 2001. This statement also applies to all business combinations
accounted for using the purchase method for which the date of acquisition is
July 1, 2001, or later. The Company will follow the guidance of this statement
for any future acquisitions it may undertake. SFAS No. 141 also established
explicit criteria for the recognition of intangible assets acquired in business
combinations.

                                     F-39

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". This statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets. It addresses how intangible
assets that are acquired individually or with a group of other assets (but not
those acquired in a business combination) should be accounted for in financial
statements upon their acquisition. This statement also addresses how goodwill
and other intangible assets should be accounted for after they have been
initially recognized in the financial statements. Under SFAS No. 142, goodwill
is no longer amortized, but reviewed for impairment annually, or more
frequently if certain indicators arise. The provisions of this statement are
required to be applied starting with fiscal years beginning after December 15,
2001. The company does not expect the application of the impairment provisions
of SFAS 142 will have an impact on the result of its operations.

   In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement establishes a
single accounting model for the impairment or disposal of long-lived assets.
The provisions of this Statement are effective for financial statements issued
for fiscal years beginning after December 15, 2001. The Company is currently
evaluating the effects of adopting this pronouncement.

2.  Organization and business

   Genmab A/S (the Company) is a biotechnology company engaged primarily in the
discovery and development of fully human monoclonal antibodies derived from
transgenic mouse technology for potential commercial applications. The Company
has focused on developing several products to treat inflammatory conditions,
such as rheumatoid arthritis and psoriasis, and antibodies to treat cancer. Its
activities have consisted primarily of pre-clinical and clinical development of
therapeutic antibody products.

   The Company was founded in 1999 by GenPharm International Inc, a
wholly-owned subsidiary of Medarex, Inc., through the purchase of a shell
company that was formed in June 1998, but had not conducted any business
activities.

   The Company has three wholly-owned subsidiaries: Genmab B.V. which was
incorporated in The Netherlands in 2000 and focuses on the discovery and
development of antibodies; Genmab, Inc. which started in July 2001 and is
mainly focused on conducting clinical trials in the US and Canada on behalf of
the Genmab group and Genmab Ltd, an empty shell company that was formed in the
United Kingdom in 2001. This entity is currently not active. Genmab A/S also
holds equity interests in a number of strategic partners.

   As of December 31, 2001, the Company has not commenced commercial operations
and accordingly is in the development stage. The Company has not generated any
revenues nor is there any assurance of significant future revenues from its
development activities. The research and development activities engaged in by
the Company involve a high degree of risk and uncertainty. The ability of the
Company to successfully develop, manufacture and market its proprietary
products is dependent upon many factors. These factors could include, but are
not limited to, the need for additional financing, the reliance on
collaborative arrangements for research and development, marketing and product
commercialization and the ability to develop or obtain manufacturing, sales and
marketing capabilities. Additional factors could include maintaining patents
and proprietary technologies, technological change and risk of obsolescence,
development of products, competition, government regulations and regulatory
approval, and product liability exposure. As a result of the aforementioned
factors and related uncertainties, there can be no assurance of the Company's
future success.

                                     F-40

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)



3.  Interest Income

<TABLE>
<CAPTION>
                                     12 months    12 months  12 months   12 months
                                       ended        ended      ended       ended
                                    December 31,  December   December   December 31, Total since
                                        2001      31, 2001   31, 2000       1999      inception
                                    ------------ ----------- ---------- ------------ -----------
                                        DKK          USD        DKK         DKK          DKK
                                                 (Unaudited)
<S>                                 <C>          <C>         <C>        <C>          <C>
Interest and other financial income  91,152,293  10,839,205  28,122,384  1,003,411   120,278,430
Realized gains on securities.......   4,679,168     556,415           0          0     4,679,168
Exchange rate adjustments..........  10,996,232   1,307,596  34,542,627          0    45,538,859
                                    -----------  ----------  ----------  ---------   -----------
                                    106,827,693  12,703,216  62,665,011  1,003,411   170,496,457
                                    -----------  ----------  ----------  ---------   -----------
</TABLE>

4.  Interest Expense

<TABLE>
<CAPTION>
                                         12 months    12 months    12 months    12 months
                                           ended        ended        ended        ended
                                        December 31, December 31, December 31, December 31, Total since
                                            2001         2001         2000         1999      inception
                                        ------------ ------------ ------------ ------------ -----------
                                            DKK          USD          DKK          DKK          DKK
                                                     (Unaudited)
<S>                                     <C>          <C>          <C>          <C>          <C>
Imputed interest related to technology
  right obligation.....................   3,182,311     378,419    1,065,008          0      4,247,319
Realized loss on securities............     348,528      41,445            0          0        348,528
Impairment loss on other securities and
  equity interests.....................  14,226,923   1,691,768            0          0     14,226,923
Exchange rate adjustments..............  27,053,901   3,217,063    1,068,049      3,652     28,125,602
                                         ----------   ---------    ---------      -----     ----------
                                         44,811,663   5,328,695    2,133,057      3,652     46,948,372
                                         ----------   ---------    ---------      -----     ----------
</TABLE>

   For discussion on impairment loss on investment securities, see Other
Securities and Equity Investments in footnote 10. For discussion on imputed
interest related to technology right obligation, see Payable Technology rights
in footnote 11.

                                     F-41

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)



5.  Income Taxes

   Calculated tax for the 12 month period ended December 31, 2001; 2000 and
1999 is DKK 4,634 for 2001 and DKK 0 for all entities in 2000 and 1999. No
corporate taxes have been paid in the financial year. A reconciliation of the
provision for income taxes and the amount computed by applying the applicable
rate of 30% (1999: 32%) to income before provision for income tax is a follows:

<TABLE>
<CAPTION>
                                             12 months    12 months    12 months    12 months
                                               ended        ended        ended        ended
                                            December 31, December 31, December 31, December 31,
                                                2001         2001         2000         1999
                                            ------------ ------------ ------------ ------------
                                                DKK          USD          DKK          DKK
                                                         (Unaudited)
<S>                                         <C>          <C>          <C>          <C>
Loss before taxes.......................... (55,689,576)  (6,622,222)  (7,371,959)  (6,099,892)
Permanent differences......................     989,015      117,607      558,840      169,948
Permanent differences related to expensed
  warrants.................................   3,014,168      358,424    1,403,064            0
Change in valuation allowance to unrealized
  gains and losses.........................   5,962,157      708,979   (5,764,613)           0
Change in tax rate, from 32% to 30%........           0            0      370,622            0
Other change in deferred tax valuation
  allowance................................  45,728,870    5,437,764   10,804,046    5,929,944
                                            -----------   ----------   ----------   ----------
Income taxes...............................       4,634          552            0            0
                                            -----------   ----------   ----------   ----------
</TABLE>

   At December 31, 2001, the Company had net operating loss carry-forwards of
approximately DKK 199 million for income tax purposes that expire in years 2003
through 2006 and deductible temporary timing differences of approximately DKK 8
million. For financial reporting purposes the value of the net deferred tax
asset has been reduced to zero due to uncertainties with respect to the
Company's ability to generate taxable income in the future sufficient to
realize the benefit of deferred income tax assets.

   Significant components of deferred income tax assets of Genmab Consolidated
consist of the following:

<TABLE>
<CAPTION>
                                                  December 31, December 31, December 31, December 31,
                                                      2001         2001         2000         1999
                                                  ------------ ------------ ------------ ------------
                                                      DKK          USD          DKK          DKK
                                                               (Unaudited)
<S>                                               <C>          <C>          <C>          <C>
Deferred tax asset
Tax deductible losses............................ 199,984,674   23,780,804   61,376,251   10,765,608
Licenses and rights..............................  11,250,711    1,337,857    3,822,025    7,733,689
Plant and equipment..............................    (799,937)     (95,123)    (718,172)      31,778
Other temporary differences......................  (2,225,915)    (264,690)  (8,700,136)           0
                                                  -----------   ----------  -----------   ----------
Accumulated temporary differences................ 208,209,533   24,758,848   55,779,968   18,531,075
                                                  -----------   ----------  -----------   ----------
Deferred tax asset, calculated at 30% (1999: 32%)  62,462,860    7,427,654   16,733,990    5,929,944
Valuation allowance.............................. (62,462,860)  (7,427,654) (16,733,990)  (5,929,944)
                                                  -----------   ----------  -----------   ----------
                                                            0            0            0            0
                                                  -----------   ----------  -----------   ----------
</TABLE>

                                     F-42

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


6.  Marketable Securities

   All marketable securities are deemed by management to be available for sale
and are reported at fair value. The Company's portfolio of marketable
securities has an average duration of less than 12 months and no securities
have more than three years to maturity. The Company has classified all
investments as short-term since it has the intent and ability to sell or redeem
them within the year.

<TABLE>
<CAPTION>
                                               December 31,   December 31, December 31,
                                                   2001           2001         2000
                                               -------------  ------------ -------------
                                                   DKK            USD          DKK
                                                              (Unaudited)
<S>                                            <C>            <C>          <C>
Cost at the end of the period................. 1,432,718,691  170,369,070  1,740,783,042
Unamortized cost..............................    (4,187,747)    (497,978)     5,236,756
                                               -------------  -----------  -------------
Total amortized costs at the end of the period 1,428,530,944  169,871,092  1,746,019,798
Unrealized gain (loss) at the end of year.....     4,842,770      575,869    (19,215,205)
                                               -------------  -----------  -------------
Net book value................................ 1,433,373,714  170,446,961  1,726,804,593
                                               -------------  -----------  -------------
</TABLE>

   In 2001, the Company recognized DKK 1,134,317 of the 2000 unrealized gains
in the statement of operations.

Specification of portfolio as of December 31, 2001

<TABLE>
<CAPTION>
                                                      Cost         Cost     Market Value  Market Value
                                                  ------------- ----------- ------------- ------------
                                                      DKK           USD         DKK           USD
                                                                (Unaudited)               (Unaudited)
<S>                                               <C>           <C>         <C>           <C>
Kingdom of Denmark bond.......................... 1,165,322,779 138,572,184 1,167,074,261 138,780,458
Other securities denominated in DKK..............   139,436,873  16,580,876   140,095,276  16,659,169
                                                  ------------- ----------- ------------- -----------
Total DKK-denominated securities................. 1,304,759,652 155,153,060 1,307,169,537 155,439,627
US Government and Federal Agency Notes...........    76,711,318   9,121,983    77,829,972   9,255,066
Corporate Notes..................................    51,247,721   6,094,027    48,374,205   5,752,328
                                                  ------------- ----------- ------------- -----------
Total USD-denominated securities.................   127,959,039  15,216,010   126,204,177  15,007,334
                                                  ------------- ----------- ------------- -----------
Total securities................................. 1,432,718,691 170,369,070 1,433,373,714 170,446,961
                                                  ------------- ----------- ------------- -----------
</TABLE>

Specification of portfolio as of December 31, 2000

<TABLE>
<CAPTION>
                                                      Cost         Cost     Market Value  Market Value
                                                  ------------- ----------- ------------- ------------
                                                      DKK           USD         DKK           USD
                                                                (Unaudited)               (Unaudited)
<S>                                               <C>           <C>         <C>           <C>
Denmark Treasury bill............................   503,861,413  59,915,740   509,252,700  60,556,835
Kingdom of Denmark bond..........................   870,224,133 103,481,079   872,288,675 103,726,580
Other securities denominated in DKK..............   147,470,430  17,536,171   148,162,160  17,618,426
                                                  ------------- ----------- ------------- -----------
Total DKK-denominated securities................. 1,521,555,976 180,932,990 1,529,703,535 181,901,841
US Government and Federal Agency Notes...........   169,011,098  20,097,639   151,150,451  17,973,774
Corporate Notes..................................    50,215,968   5,971,338    45,950,607   5,464,131
                                                  ------------- ----------- ------------- -----------
Total USD-denominated securities.................   219,227,066  26,068,977   197,101,058  23,437,905
                                                  ------------- ----------- ------------- -----------
Total securities................................. 1,740,783,042 207,001,967 1,726,804,593 205,339,746
                                                  ------------- ----------- ------------- -----------
</TABLE>


                                     F-43

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)

Scheduled maturities as of December 31, 2001

<TABLE>
<CAPTION>
                                                      Cost         Cost     Market Value  Market Value
                                                  ------------- ----------- ------------- ------------
                                                      DKK           USD         DKK           USD
                                                                (Unaudited)               (Unaudited)
<S>                                               <C>           <C>         <C>           <C>
Maturity less than one year......................   846,084,826 100,610,598   846,840,008 100,700,399
Maturity between one and three years.............   586,633,865  69,758,472   586,533,703  67,746,562
                                                  ------------- ----------- ------------- -----------
                                                  1,432,718,691 170,369,070 1,433,373,714 170,446,961
                                                  ------------- ----------- ------------- -----------
</TABLE>


7.  Plant and Equipment

<TABLE>
<CAPTION>
                                                  December 31, December 31, December 31,
                                                      2001         2001         2000
                                                  ------------ ------------ ------------
                                                      DKK          USD          DKK
                                                               (Unaudited)
<S>                                               <C>          <C>          <C>
Machinery and other equipment....................  35,730,443   4,248,819    4,674,742
Manufacturing enterprise in progress.............  14,176,413   1,685,762            0
Leasehold improvements...........................   5,462,176     649,524      394,383
                                                   ----------   ---------    ---------
Cost at the end of the period....................  55,369,032   6,584,105    5,069,125

Accumulated depreciation at the end of the period  (4,616,655)   (548,980)    (641,179)
                                                   ----------   ---------    ---------
Net book value...................................  50,752,377   6,035,125    4,427,946
                                                   ----------   ---------    ---------
</TABLE>

8.  Licenses and Rights

<TABLE>
<CAPTION>
                                                  December 31, December 31, December 31,
                                                      2001         2001         2000
                                                  ------------ ------------ ------------
                                                      DKK          USD          DKK
                                                               (Unaudited)
<S>                                               <C>          <C>          <C>
Cost at the end of the period.................... 152,484,270   18,132,382  152,484,270

Accumulated amortisation at the end of the period (57,387,037)  (6,824,072) (26,890,188)
                                                  -----------   ----------  -----------
Net book value...................................  95,097,233   11,308,310  125,594,082
                                                  -----------   ----------  -----------
</TABLE>

9.  Depreciation and Amortization

<TABLE>
<CAPTION>
                                        12 months    12 months    12 months    12 months
                                          ended        ended        ended        ended
                                       December 31, December 31, December 31, December 31, Total since
                                           2001         2001         2000         1999      inception
                                       ------------ ------------ ------------ ------------ -----------
                                           DKK          USD          DKK          DKK          DKK
                                                    (Unaudited)
<S>                                    <C>          <C>          <C>          <C>          <C>
Licenses and rights (amortized).......  30,496,849   3,626,476    19,156,499   7,733,689   57,387,037
Property and equipment (depreciated)..   3,975,476     472,736       609,401      31,778    4,616,655
                                        ----------   ---------    ----------   ---------   ----------
                                        34,472,325   4,099,212    19,765,900   7,765,467   62,003,692
                                        ----------   ---------    ----------   ---------   ----------
Depreciation and amortisation for the
  periods is expensed as follows:
Included in research and development
  costs...............................  33,774,097   4,016,184    19,413,660   7,733,689   60,921,446
Included in general and administrative
  expenses............................     698,228      83,028       352,240      31,778    1,082,246
                                        ----------   ---------    ----------   ---------   ----------
                                        34,472,325   4,099,212    19,765,900   7,765,467   62,003,692
                                        ----------   ---------    ----------   ---------   ----------
</TABLE>

                                     F-44

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


10.   Other Securities and Equity Investments

<TABLE>
<CAPTION>
                                    December 31, December 31, December 31,
                                        2001         2001         2000
                                    ------------ ------------ ------------
                                        DKK          USD          DKK
                                                 (Unaudited)
      <S>                           <C>          <C>          <C>
      Cost at the end of the period  29,916,145    3,557,423   21,504,739
      Impairment loss.............. (14,226,923)  (1,691,768)           0
                                    -----------   ----------   ----------
      Net book value...............  15,689,222    1,865,655   21,504,739
                                    -----------   ----------   ----------
</TABLE>

   Other securities and equity interest consists of equity shares in Oxford
GlycoSciences Plc with a market value of approximately DKK 7.3 million as of
December 31, 2001 and shares in a privately held British biotech company
Scancell Ltd at a total cost of DKK 8.4 million. Both companies are strategic
partners of Genmab A/S. As of December 31, 2001, the Company has recognized an
impairment loss of DKK 14.2 million regarding the equity shares in Oxford
GlycoSciences as the loss is derived from price fluctuations that are not
merely considered temporary. The investment in Scancell is currently recognized
at cost.

11.   Payable Technology Rights

   In August 2000, the Company entered into a Genomics Agreement with Medarex,
Inc., see related party footnote for additional details. The agreement requires
the Company to pay USD 2 million annually for four consecutive years beginning
at August 26, 2001. The Company has calculated the net present value of these
payments using an interest rate of 5.71% per annum, and capitalized this amount
as licenses and rights and recorded the same amount as liabilities on the
balance sheet. The Company has recognized imputed interest on the remaining
payments.

12.   Share Capital

   In February 1999, Medarex and Bankforeningernes Erhvervsudviklingsforening
Biomedicinsk Udvikling and BI Asset Management Fondsmaeglerselskab A/S,
together with Lonmodtagernes Dyrtidsfond, A/S Dansk Erhvervsinvestering and
Leif Helth Care A/S (the Bank Invest Group), entered into an agreement in which
the Bank Invest Group invested approximately DKK 35.4 million of cash in
exchange for approximately 45% equity interest in the Company. Concurrently,
Medarex granted the Company a limited number of licenses to develop and
commercialize a portfolio of fully human antibodies derived from its
HuMAb-Mouse(TM)/ Technology and retained approximately 45% equity interest. The
Company valued the license from Medarex at approximately DKK 35.4 million based
on the same equity interest the Bank Invest Group received for its cash
investment. /

   In May 1999 and February 2000, Medarex and the Bank Invest Group made
additional contributions to the Company in proportion to their existing equity
interests. The Bank Invest Group invested approximately DKK 49 million of cash
and Medarex granted the Company an additional number of fully paid licenses to
make the total 16 and in addition granted the Company an unlimited number of
royalty bearing licenses to develop additional antibodies. The Company valued
the licenses at approximately DKK 42.8 million based on valuation reports.
After the February 2000 contributions, Medarex and the Bank Invest Group each
owned approximately 45% of the Company's outstanding common shares. Employees
and directors also purchased shares at the market price pursuant with these
offerings.

   In May 2000, the February 1999 shareholders' agreement was amended and
restated as a new shareholders agreement between all of the shareholders of the
Company. In connection with the amended and restated shareholders' agreement,
the Company completed a private offering in which it received approximately
DKK 117 million of cash from new investors plus cash contributions from Medarex
and the Bank Invest Group

                                     F-45

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)

of approximately DKK 140 million and DKK 64 million, respectively. The gross
proceeds were approximately DKK 321 million. After the private offering,
Medarex and the Bank Invest Group owned approximately 45% and 35%,
respectively, of the Company's outstanding common shares.

   In August 2000, the Company entered into a Genomics Agreement with Medarex
(the "Genomics Agreement"), pursuant to which it received the exclusive rights
to market its transgenic mouse technologies for multi-target (five or more
targets) European genomics partnerships. In addition to these rights, Medarex
has also granted the Company an option on up to four anti-cancer antibodies
obtained through its agreement with Eos Biotechnology. See the footnote
concerning related party transactions for further details about the Genomics
Agreement.

   In October 2000, Genmab completed an initial public offering with a dual
listing on the Copenhagen Stock Exchange and Neuer Markt of the Frankfurt Stock
Exchange. The global offering, which constituted approximately 28% of the
Company's issued share capital, consisted of a public offering in both Denmark
and Germany and a concurrent international offer to institutional investors
outside the United States and a private placement in the United States to
qualified institutional buyers under Rule 144A. In connection with the global
offering the shareholders agreement of May 2000 was terminated.

   The issuance of new shares for the years 2000 through 2001 can be summerized
as follows: At the beginning of 2000, the Company had 671,692 outstanding
shares divided into four classes of shares, A, B, C and D. The shares had a
nominal value of DKK 1 each. In February and May 2000, the Company completed
two private placements, and issued 301,748 and 576,646 new shares,
respectively. In May 2000 a group of initial shareholders exercised 3,140
warrants, which led to issuance of 3,140 new shares. In August 2000, the total
number of outstanding shares equaled 1,553,226. Pursuant to a resolution of the
Company's shareholders on August 25, 2000, all class A, B, C and D shares were
converted into Ordinary Shares on a one-for-one basis, and a share bonus of
nine Ordinary Shares for each issued ordinary share issued and outstanding was
approved. Following this transaction the shareholders approved the issuance of
279,760 Ordinary Shares to Medarex in connection with the execution of the
Genomics Agreement. In October 2000, the Company completed its initial public
offering, and was listed on the Copenhagen Stock Exchange and Frankfurt Neuer
Markt. In connection with the offering, 6,000,000 new shares were issued. At
December 31, 2001, the total number of outstanding ordinary shares was
21,812,020. Each share has a nominal value of DKK 1 and one vote.

13.   Warrants

   In February 2000, the Board of Directors adopted a warrant plan. Under the
February plan, the Board reserved 554,500 warrants. The reservation was later
increased by 335,500 warrants, of which 40,000 relate to the authorization
given by the shareholders in May 2000 for grants allotted to Board members,
employees and non-employee consultants at exercise prices equal to or greater
than the fair value of the Company's ordinary shares on the respective grant
dates. Warrants can be exercised on shares reserved for issuance under the
warrant plan. The terms of the plan state that one-half of warrants granted can
be exercised one year after the grant date with the other half exercisable two
years after the grant date. Exercise of the warrants is not conditional upon
continued employment or affiliation with the Company.

   The exercise period lasts for three years from the day when a warrant first
becomes exercisable. If the warrant holder exercises warrants, upon cessation
of employment or affiliation, except in the event of termination by the Company
without cause or cessation from the Company's breach of the employment or
affiliation contract, the holder is obligated to offer to sell a specified
percentage of shares issued back to the Company according to the following
schedule:

   .   75% of shares if termination occurs in the second year after grant.

                                     F-46

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   .   50% of shares if termination occurs in the third year after grant.

   .   25% of shares if termination occurs in the fourth year after grant.

   The repurchase price to be paid for the shares by the Company is the warrant
holder's original exercise price plus 5% per annum, the latter of which is only
payable if the market value of the shares is higher than the exercise price
plus 5%.

   The warrant plans also contain anti-dilution provisions if changes occur in
the Company's share capital prior to the exercise.

   In February, March and June 2000, the Board issued all of the warrants in
this program to the Company's employees, members of the Board of Directors and
the Scientific Advisory Board.

   In July 2000, the Board of Directors adopted a second warrant plan. Under
the July plan, the Board reserved 1,257,730 warrants for grants to Board
members, employees and non-employee consultants at exercise prices equal to or
greater than the fair value of the Company's ordinary shares on the respective
grant dates. The conditions in the July warrant plan are approximately similar
to the conditions of the February warrant plan 1,105,500 warrants were granted
to Board members, employees and non-employee consultants.

   In August 2000, the Company's shareholders authorized the Board of Directors
to issue 2,163,533 warrants for the subscription of 2,163,533 ordinary shares
to employees, members of the Board of Directors, the Scientific Advisory Board
and other consultants. In December 2000, the Board of Directors granted 318,500
warrants to employees and members of the Board of Directors.

   At December 31, 2000 the total number of granted warrants equals 2,314,000
of which 2,159,000 were granted to employees and members of the Board of
Directors. Members of the Scientific Advisory Board and external non-employee
consultants have been granted a total of 155,000 warrants. For the year ended
December 31, 2001 a total of 1,114,300 warrant were granted. Members of the
Scientific Advisory Board and external non-employee consultants received 15,000
warrants and 1,099,300 was granted to employees and members of the Board of
Directors during 2001.

   A summary of warrant activity and related information for the Company's
warrant compensation plans is as follows:

<TABLE>
<CAPTION>
                        12 months    12 months    12 months     12 months      12 months      12 months      12 months
                          ended        ended        ended         ended          ended          ended          ended
                       December 31, December 31, December 31,  December 31,   December 31,   December 31,   December 31,
                           2001         2000         1999          2001           2001           2000           1999
                       ------------ ------------ ------------ -------------- -------------- -------------- --------------
                                                                 Weighted       Weighted       Weighted       Weighted
                        Number of    Number of    Number of      average        average        average        average
                          shares       shares       shares    exercise price exercise price exercise price exercise price
                       ------------ ------------ ------------ -------------- -------------- -------------- --------------
                                                                   DKK            USD            DKK            DKK
                                                                              (Unaudited)
<S>                    <C>          <C>          <C>          <C>            <C>            <C>            <C>
Outstanding at the
 beginning of the
 period...............  2,314,000           --        --           90.19         10.72             --            --
Granted...............  1,114,300    2,314,000        --          147.22         17.50          90.19            --
Exercised.............         --           --        --              --            --             --            --
Cancelled.............         --           --        --              --            --             --            --
                        ---------    ---------        --          ------         -----          -----            --
Outstanding at the end
 of the period........  3,428,300    2,314,000        --          108.73         12.92          90.19            --
                        ---------    ---------        --          ------         -----          -----            --
Warrants available for
 future grants at the
 end of the year......    842,963
                        ---------
</TABLE>

                                     F-47

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   Weighted average exercise price of warrants issued in 2001 and 2000:

<TABLE>
<CAPTION>
                                             12 month     12 month
                                           period ended period ended
                                           December 31, December 31,
                                               2001         2000
                                           ------------ ------------
                                               DKK          DKK
           <S>                             <C>          <C>
           Warrants issued at a discount..    148.00          --
           Warrants issued at market price    129.44          --
           Warrants issued at a premium...        --       90.19
</TABLE>

   Weighted average grant date fair value of warrants granted in 2001 and 2000:

<TABLE>
<CAPTION>
                                             12 month     12 month
                                           period ended period ended
                                           December 31, December 31,
                                               2001         2000
                                           ------------ ------------
                                               DKK          DKK
           <S>                             <C>          <C>
           Warrants issued at a discount..    70.54           --
           Warrants issued at market price    52.34           --
           Warrants issued at a premium...       --        14.70
</TABLE>

   The total compensation cost recognized in income for stock-based employee
compensation awards were DKK 2,756,527 for the year ended December 31, 2001.
For the year ended December 31, 2000, no compensation cost was recognized. For
non-employees compensation cost for the years ended December 31, 2001 and 2000
amounted to DKK 7,290,696 and DKK 4,676,879, respectively.

   The grant of 212,500 warrants made on March 6, 2001 was subsequently
re-priced by reducing the exercise price from DKK 222 to DKK 148 following the
extraordinary board meeting of Genmab on July 30, 2001. According to FIN 44,
this re-pricing triggers variable accounting under APB 25. This means that the
ultimate charge recognized for this grant of warrants should be based on the
intrinsic value at the point of exercise. Until that time, charges in each
fiscal year should be based on the intrinsic value at the end of that year i.e.
the charge for these warrants should be "marked to market".

   If the Company had elected to recognize compensation expenses based on the
fair value of the warrants granted at the grant date, net loss and loss per
share would have been increased to the pro forma amounts indicated in the table
below.

<TABLE>
<CAPTION>
                              12 months     12 months    12 months    12 months
                                ended         ended        ended        ended
                             December 31,  December 31, December 31, December 31, Total since
                                 2001          2001         2000         1999      inception
                             ------------  ------------ ------------ ------------ ------------
                                 DKK           USD          DKK          DKK          DKK
                                           (Unaudited)
<S>                          <C>           <C>          <C>          <C>          <C>
Net loss.................... (185,636,593) (22,074,624) (24,573,196) (19,062,164) (229,275,571)
                             ------------  -----------  -----------  -----------  ------------
Pro forma net loss.......... (198,809,393) (23,641,048) (26,472,782) (19,062,164) (244,347,997)
                             ------------  -----------  -----------  -----------  ------------
Net loss per share..........         (8.5)        (1.0)        (1.8)        (3.5)
                             ------------  -----------  -----------  -----------
Pro forma net loss per share         (9.1)        (1.1)        (1.9)        (3.5)
                             ------------  -----------  -----------  -----------
</TABLE>

                                     F-48

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   The fair value of each warrant grant is estimated on the date of the grant
using the Black Scholes pricing model with the following assumptions.

<TABLE>
<CAPTION>
                                                 2001    2000
                                                ------- -------
                <S>                             <C>     <C>
                Expected dividend yield........      0%      0%
                Expected stock price volatility     45%     45%
                Risk-free interest rate........   4.57%   4.57%
                Expected life of warrants...... 4 years 4 years
</TABLE>

   The issued and outstanding warrants to shareholders, board members,
employees and non-employee consultants as of December 31, 2001 are summarized
as follows:

<TABLE>
<CAPTION>
                                       Warrants outstanding       Warrants Exercisable
                                 -------------------------------- --------------------
                                              Weighted
                                               average
                                              remaining  Weighted             Weighted
                   Warrants       Number of  contractual average   Number of  average
                  exercisable     warrants      life     exercise  Warrants   exercise
Exercise price       from        outstanding (in years)   price   exercisable  price
-------------- ----------------- ----------- ----------- -------- ----------- --------
<S>            <C>               <C>         <C>         <C>      <C>         <C>
 DKK 48.9      February 11, 2001    554,500     2.62       48.9      277,250    48.9
 DKK 59.7      June 26, 2001      1,441,000     3.08       59.7      720,500    59.7
 DKK 116.0     December 5, 2002      84,000     4.43      116.0           --      --
 DKK 117.5     November 7, 2002     254,300     4.35      117.5           --      --
 DKK 148.0     March 6, 2002        212,500     3.68      148.0           --      --
 DKK 165.0     July 31, 2002        563,500     4.08      165.0           --      --
 DKK 300.0     December 6, 2001     318,500     3.43      300.0      159,250   300.0
 ---------                        ---------     ----      -----    ---------   -----
 DKK 48.9 to
   DKK 300                        3,428,300     3.36      108.7    1,157,000    90.2
                                  ---------     ----      -----    ---------   -----
</TABLE>

14.  Internal Shareholders

<TABLE>
<CAPTION>
                                   Number of ordinary Number of warrants
                                   shares owned as of   granted as of
                                   December 31, 2001  December 31, 2001
                                   ------------------ ------------------
                                      (unaudited)        (unaudited)
       <S>                         <C>                <C>
       Board of Directors
       Lisa N. Drakeman...........      301,440             515,000
       Jesper Zeuthen.............       72,680             100,000
       Leif Helth Jensen..........       46,476              65,000
       Francesco de Rubertis......           --              20,000
       Ernst Schweizer............       91,840              66,000
       Irwin Lerner...............           --              60,000
                                        -------           ---------
                                        512,436             826,000
       Management
       Lisa N. Drakeman, see above           --                  --
       Jan van de Winkel..........       82,000             280,000
       Claus Juan Moller-San Pedro      228,350             330,000
       Zahed Subhan...............           --             200,000
       Michael Wolff Jensen.......           --             200,000
                                        -------           ---------
                                        310,350           1,010,000
                                        -------           ---------
       Total......................      822,786           1,836,000
                                        -------           ---------
</TABLE>

                                     F-49

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


15.  Related Party Transactions

   At December 31, 2001, Medarex, Inc. owns approximately 33% of the
outstanding shares of the Company through its wholly owned subsidiary, GenPharm
International, Inc.

   During 1999 and 2000 Medarex granted 16 fully paid-up exclusive licenses to
the Company to use its HuMAb-Mouse and Tc Mouse(TM) technology to produce fully
human monoclonal antibodies for 16 antigens to be specified by the Company. In
addition, Medarex granted the Company a non-exclusive license to use the HuMAb
technology to produce fully human monoclonal antibodies for an unlimited number
of antigens. At December 31, 2001, the Company has not exercised any rights to
the non-exclusive royalty bearing licenses.

   In January 2000, the Company and Medarex entered into a manufacturing
agreement under which Medarex will produce antibodies to be used by the Company
in the clinical testing phase of product development. In 2001, the Company
entered into a manufacturing agreement with a third party supplier, and
accordingly Medarex is no longer the Company's sole source for antibody
production capacity.

   In August 2000, the Company entered into the Genomics Agreement, pursuant to
which Medarex granted the Company the exclusive rights to market its transgenic
mouse technologies for multi-target (five or more targets) European genomics
partnerships. Genmab's territory includes companies with European headquarters,
such as Oxford GlycoSciences, that have either developed or gained access to
genomics or other novel targets. The Company also may conduct business with any
company it may choose for non multi-target (less than five targets) products.

   In exchange for the rights granted to Genmab by Medarex under the Genomics
Agreement, the Company issued 279,760 Ordinary Shares to Medarex. Such amounts
were assigned at a value of DKK 16,701,672, equal to USD 2 million, at the
exchange rate prevailing at the date of issuance. Each year from 2001 to 2004,
the Company will pay Medarex USD 2 million per year. This has been accrued with
imputed interest. The Company has the option to pay these amounts in either
cash or Ordinary Common Shares. The payment in 2001 was made in cash. The
Genomics Agreement has an initial term of five years with a right exercisable
by the Company to extend the term for a further two years.

   The partnering model entered into between Medarex and Genmab in the Genomics
Agreement is based on collaboration, cost-sharing and shared commercial rights.
In a typical collaboration, the target company will contribute five or more
targets to the alliance. Genmab and Medarex will jointly contribute the
antibody products to the targets. For each product to be developed, the target
company will pay half the development costs and Genmab and Medarex together
will pay equally the other half.

   Genmab and Medarex together may also make their full repertoire of antibody
development capabilities available to the collaborations, including
pre-clinical and clinical research and manufacturing capacity.

   In addition to these rights, Medarex has also granted to Genmab, under the
Genomics Agreement, an option on up to four anti-cancer antibodies obtained
through its agreement with Eos Biotechnology. After subsequent modification of
the EOS/Medarex agreement, the collaboration is based on a cost-sharing and
shared commercial rights model to novel cancer targets discovered by EOS
Biotechnology. The terms of this type of collaboration are described above.

   In September 2000, Genmab entered into an amended and restated Genomics
Agreement with Medarex. Medarex agreed to assign to the Company 100% of
Medarex's economic interest in each product Medarex jointly develops with
Oxford GlycoSciences and sells in Europe, and 50% of its economic interest in
each product sold outside North America and Europe. Also, in September 2000,
the Company purchased shares in Oxford GlycoSciences from Medarex at the market
value at a total cost of approx. DKK 21.5 million.

                                     F-50

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   In June 2001, the Company and Medarex entered a collaboration agreement to
develop an anti-inflammatory antibody therapeutic. Under the agreement the
parties will share the cost associated with the pre-clinical and clinical
development of the product and will share the commercialization rights and
royalties.

   The Company has paid Medarex for manufacturing services and reimbursement of
administrative expenses. For 2001, 2000 and 1999 the Company has expensed DKK
23,949,513, DKK 21,865,757 and DKK 5,264,568, respectively in connection with
these agreements. In addition the Company paid DKK 16,912,200 to Medarex in
connection with the Genomics Agreement in 2001. The Company has therefore
expensed a total of DKK 72,347,579 for the period 11 June 1998 (date of
inception) to December 31, 2001.

   The Company has been reimbursed by Medarex DKK 511,858, 135,566 and 56,357
for the 12 month periods ended December 31, 2001, 2000 and 1999, respectively,
for costs occurred at their behalf. The Company leases from Medarex a limited
area of office space in Princeton, New Jersey, USA. At the end of 2001, these
leasing transactions are considered immaterial.

   Licenses and rights contributed to Genmab in connection with the Genomics
Agreement with Medarex have been recorded at historic cost for the initial fee,
and net present value for the remaining four payments. Debt related to the net
present value of the remaining payments is included in the Liabilities, and
allocated in short- and long-term payable technology rights. The amortization
is based on the straight-line method for net present value, using an estimated
useful life of five years.

   Other licenses previously contributed to Genmab by Medarex have been
recorded at their value on the date of contribution, and are supported by
independent valuation studies. These licenses are also being amortized using
the straight-line method over an estimated useful life of five years.

   The Company has identified other related parties as being GenPharm, Oxford
GlycoSciences, Scancell, its own subsidiaries and its officers and directors.
No significant transactions, which are not eliminated in the consolidation have
taken place with these other related parties, other than disclosed in the
financial statements.

16.  Research and Development Agreements

   The Company has entered into a new agreement with Immunex Corporation
("Immunex") for the exclusive worldwide rights to Immunex's patent estate
relating to antibodies towards IL15 and IL15r. Immunex retains an option,
exercisable after Phase II clinical trials have been completed, to
commercialize the resulting product. Upon exercise of the option, Immunex would
be obligated to pay to the Company license fees, milestone payments as well as
be obligated to share future profits with the Company. Immunex would also be
responsible for all future development costs.

   Also, the Company has announced a broad antibody development collaboration
with Hoffman-La Roche Ltd. for the creation and development of human antibody
therapeutics products towards targets identified by Roche. The Company is to
undertake research and development activities whereas Roche will undertake
commercialization after filing of biologics license application. The Company
will receive certain milestone and royalty payments depending the successful
development of products.

   During 2001, the Company entered into a number of additional agreements with
parties such as Scancell, deCode and Glaucus to develop new antibody
therapeutic products. The collaborations will utilize novel disease targets
discovered by the partners. The companies will focus on several therapeutic
areas. The alliances are mainly multi-target alliances based on the Company's
Genomics Agreement with Medarex and a number of partners have already
identified initial groups of disease targets using genomics or other
capabilities.

   No material costs were incurred in connection with these agreements during
2001 and 2000.

                                     F-51

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


17.  Commitments and Contingencies

   Leases

   The Company leases office space under operating leases, which are not
cancelable up until 2006. At December 31, 2001, future minimum payments under
the office leases were as follows:

<TABLE>
<CAPTION>
                                                      USD
                                          DKK     (Unaudited)
                                       ---------- -----------
                   <S>                 <C>        <C>
                   2002............... 10,016,346  1,191,075
                   2003...............  9,848,504  1,171,116
                   2004...............  9,569,438  1,137,932
                   2005...............  8,114,911    964,969
                   2006...............  4,222,404    502,099
                                       ----------  ---------
                                       41,771,603  4,967,191
                                       ----------  ---------
</TABLE>

   For the years ended December 31, 2001, 2000 and 1999, the Group paid rent
expenses of DKK 3,965,732, DKK 517,384 and DKK 162,386, respectively.

   Other Purchase Obligations

   The Company has entered into a number of agreements, mainly within the area
of manufacturing services related to the research and development activities.
The agreements will lead to the following future payments:

<TABLE>
<CAPTION>
                                                      USD
                                          DKK     (Unaudited)
                                      ----------- -----------
                  <S>                 <C>         <C>
                  2002...............  32,916,225  3,914,171
                  2003...............  31,907,225  3,794,188
                  2004...............  67,647,600  8,044,188
                  2005...............  65,545,225  7,794,188
                                      ----------- ----------
                                      198,016,275 23,546,735
                                      ----------- ----------
</TABLE>

   License Agreements

   The Company is a party to a number of license agreements, which call for
royalties to be paid by the Company if and when the Company commercializes
products utilizing the licensed technology.

18.  Subsequent Events

   In January 2002, the Company announced an expansion of the collaboration
agreement from September 2000 with Oxford GlycoSciences and Medarex. The
parties announced a campaign to treat breast cancer based on an array of novel
medical products derived from proteomics and antibody technology.

19.  Reconciliation from US GAAP to Danish GAAP

   Marketable Securities

   SFAS 115 "Accounting For Certain Investments In Debt An Equity Securities"
established guidelines for the reporting and display of marketable securities
in the financial statements in accordance with US GAAP. Investments accounted
for under SFAS 115 applies the fair value concept to these securities.
Investments classified as available-for-sale have all unrealized gains and
losses included as part of Comprehensive income/loss in shareholders' equity.

                                     F-52

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   According to Danish GAAP such securities are classified as marketable
securities and unrealized gains and losses (including exchange rate gains and
losses) on such securities are included in the statement of operations and
included as a non-distributable component of shareholders equity.

   There are no quantifiable differences in shareholders' equity resulting from
the accounting treatment applied by the Company under US GAAP as opposed to
Danish GAAP.

   Transactions Entered into by a Principal Shareholder on the Company's Behalf

   Under US GAAP, certain transactions entered into by a principal shareholder
on the Company's behalf are recognized in the Company's financial statements
through the recognition of an asset or an expense and a corresponding credit to
shareholders' equity. The Company has recorded a deferred compensation and an
offsetting credit to shareholders' equity in connection with the sale by a
principal shareholder in 1999 of 50,000 of the Company's shares to a number of
the Company's employees and directors for nominal value. Deferred compensation
associated with this transaction has been amortized as a charge against income
over the vesting period and as of August 25, 2000, the balance of deferred
compensation relating to the transaction has been expensed due to the
termination of the shareholder's agreement containing the vesting clause. Had
the annual report of the Company been prepared in accordance with Danish GAAP,
which differs in certain aspects from US GAAP, no such recognition would be
required.

   In, 2001, the Company determined that the expense recorded in 2000 for the
fair value of warrants granted to non-employees should be recorded using the
method of attribution specified by FASB Interpretation No. 28. This method
results in an accelerated attribution of the expense recognized for such
warrants over the specified vesting period rather than the straight-line method
previously used. Additionally, the Company determined that the compensation
associated with certain transactions entered into by principal shareholders on
Company's behalf should be fully recognized in 2000 in connection with the
cancellation of the previously existing vesting provisions. The aggregate
effect of the adjustments for the foregoing items resulting in increases in the
net loss in 2000 by DKK 6,022,103 for US GAAP reporting purposes.

                                     F-53

<PAGE>

                   Genmab A/S (A development stage company)

                NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   Summary

   Application of Danish GAAP would have affected net loss for the periods
ended December 31, 2001, 2000 and 1999 to the extent described below.
Application of Danish GAAP would not have affected shareholders' equity as of
any date for which financial information is presented herein.

<TABLE>
<CAPTION>
                                      12 months     12 months    12 months    12 months
                                        ended         ended        ended        ended
                                     December 31,  December 31, December 31, December 31, Total since
                                         2001          2001         2000         1999      inception
                                     ------------  ------------ ------------ ------------ ------------
                                         DKK           USD          DKK          DKK          DKK
<S>                                  <C>           <C>          <C>          <C>          <C>
Net loss according to
  US GAAP........................... (185,636,553) (22,074,624) (24,573,196) (19,062,164) (229,275,571)
Unrealized gain/(loss) on short term
  marketable securities.............   (1,520,251)    (180,778)   3,615,362            0     2,095,111
Reversed transaction entered into by
  principal shareholder on
  Company's behalf..................            0            0    4,488,750    1,181,250     5,670,000
Unrealized exchange rate gain/(loss)
  marketable securities.............   21,390,479    2,543,609  (22,830,567)           0    (1,440,088)
Recognition of expense associated
  with warrants granted to non-
  employees using an accelerated
  method of attribution.............   (2,950,853)    (350,895)   2,950,853            0             0
                                     ------------  -----------  -----------  -----------  ------------
Net loss according to
  Danish GAAP....................... (168,717,178) (20,062,688) (36,348,798) (17,880,914) (222,950,548)
                                     ------------  -----------  -----------  -----------  ------------
</TABLE>

                                     F-54

<PAGE>

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

   None.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

   The information required herein will be reported in our definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on May 22, 2002,
which will be filed on or before April 19, 2002, and is incorporated herein by
reference.

Item 11.  Executive Compensation

   The information required herein will be reported in our definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on May 22, 2002,
which will be filed on or before April 19, 2002, and is incorporated herein by
reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

   The information required herein will be reported in our definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on May 22, 2002,
which will be filed on or before April 19, 2002 and is incorporated herein by
reference.

Item 13.  Certain Relationships and Related Transactions

   The information required herein will be incorporated in our definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on May 22, 2002,
which will be filed on or before April 19, 2002, and is incorporated herein by
reference.

<PAGE>

                                    PART IV

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

<TABLE>
<CAPTION>
   Item
 Number
 -----
<C>        <S>
(a).1. (a) Consolidated Financial Statements--Medarex, Inc.

           Report of Independent Auditors.

           Consolidated Balance Sheets as of December 31, 2000 and 2001

           Consolidated Statements of Operations for the Years Ended December 31, 1999, 2000 and 2001.

           Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1999, 2000
           and 2001

           Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 2000 and 2001.

           Notes to Consolidated Financial Statements

(a).1.(b)  Consolidated Financial Statements--Genmab A/S (A Development Stage Company)

           Report of Independent Accountants

           Consolidated Balance Sheets as of December 31, 2001 and 2000

           Consolidated Statements of Operations for the year ended December 2001, 2000 and 1999 and the
           total since inception

           Consolidated Statements in Shareholders' Equity for the twelve months ended December 31,
           2001, 2000 and 1999, and for the period from inception (June 11, 1998) to December 31, 2001

           Consolidated Statements of Cash Flows for the twelve months ended December 31, 2001, 2000
           and 1999 and the total since inception

           Notes to Consolidated Financial Statements

(a).2.     Financial Statement Schedules

           All financial statement schedules for which provision is made in the applicable Accounting
           regulations of the Securities and Exchange Commission are either not required under the related
           instructions or are inapplicable because the required information is included in the consolidated
           financial statements or related notes thereto.

(a).3.     Exhibits

 2.1(1)    Certificate of Merger, dated June 15, 1989, including Plan of Merger.

 2.2(18)   Agreement and Plan of Merger among Medarex, Inc., Medarex Acquisition Corp. and Houston
           Biotechnology Incorporated dated December 18, 1996, together with the exhibits thereto.

 2.3(28)   Amended and Restated Agreement and Plan of Reorganization among the Registrant, Medarex
           Acquisition Corp. and GenPharm International, Inc., dated as of May 5, 1997, together with
           Exhibits thereto.

 3.1(56)   Restated Certificate of Incorporation, as amended, of the Registrant.

 3.2(1)    Amended and Restated By-laws of the Registrant.

 4.1(1)    Form of Specimen of Common Stock Certificate.

10.3(1)    1991 Employee Stock Option Plan.

10.5(1)    Joint Venture Agreement by and among Trustees of Dartmouth College, Essex Medical Products,
           Inc. and the Registrant, dated as of July 15, 1987.

10.6(1)    Exclusive License Agreement by and between Trustees of Dartmouth College and the Registrant,
           dated July 15, 1987.

</TABLE>

<PAGE>

<TABLE>
<C>         <S>
10.7(1)     Non-Exclusive License Agreement by and between Trustees of Dartmouth College and the
            Registrant, dated July 15, 1987.

10.8(1)     Assignment Agreement by and between the Registrant and Michael W. Fanger, dated July 15,
            1987.

10.10(1)    Assignment Agreement by and between the Registrant and Paul M. Guyre, dated July 15, 1987.

10.12(1)    Assignment Agreement by and between the Registrant and Edward Ball, dated July 15, 1987.

10.14(1)    Stock Purchase Agreement among Essex Vencap, Inc. and Medarex Founders and the Registrant,
            dated as of June 15, 1989.

10.23(1)    Agreement dated as of May 16, 1991 by and among Trustees of Dartmouth College and the
            Registrant relating to the assignment of certain patents and the modification of the Joint Venture
            Agreement.

10.24(1)    Assignment of certain patent rights by Trustees of Dartmouth College to the Registrant dated May
            16, 1991.

10.28(1)    Employment Agreement by and between the Registrant and Dr. Donald Drakeman, dated as of
            April 1, 1991, as amended.

10.37(3)    Employment Agreement by and between the Registrant and Michael A. Appelbaum, dated as of
            July 29, 1991.

10.51(8)    1992 Employee Stock Option Plan.

10.52(10)   Lease of Registrant's Laboratory Facility (Annandale, New Jersey).

10.53(11)   Amendment to Lease of Registrant's Laboratory Facility (Annandale, New Jersey).

10.54(11)   Employment Agreement by and between the Registrant and Yashwant M. Deo, dated as of July 8,
            1993.

10.56(12)   Consulting Agreement dated February 10, 1994 by and between the Registrant and Dr. Julius A.
            Vida.

10.57(13)** Letter of Intent dated March 30, 1994 between the Registrant and E. Merck.

10.61(9)    1995 Stock Option Plan.

10.62(9)    Stock Purchase Agreement dated May 16, 1995 between the Registrant and Novartis, Inc.

10.73(23)** Release and Settlement Agreement, dated March 26, 1997, among Cell Genesys, Inc., Abgenix,
            Inc., Xenotech, L.P., Japan Tobacco, Inc. and GenPharm International, Inc.

10.74(24)** Cross License Agreement, effective as of March 26, 1997, among Cell Genesys, Inc., Abgenix,
            Inc., Xenotech, L.P., Japan Tobacco, Inc. and GenPharm International, Inc.

10.75(25)** Interference Settlement Procedure Agreement, effective as of March 26, 1997, among Cell
            Genesys, Inc., Abgenix, Inc., Xenotech, L.P., Japan Tobacco, Inc. and GenPharm International,
            Inc.

10.81(33)   Rights Exchange Agreement dated as of June 10, 1998 between the Registrant and BCC
            Acquisition I LLC, together with the exhibits thereto.

10.84(36)** Shareholders Agreement dated February 25, 1999 among Medarex, Inc., GenPharm International,
            Inc., BankInvest, BI Asset Management, Fondsmaeglerselskab A/S and certain other investors.

10.85(37)** Evaluation and Commercialization Agreement dated as of February 25, 1999 among Medarex,
            Inc., GenPharm International, Inc. and Genmab.

10.86(30)   Medarex, Inc. Executive Deferred Savings Plan.

</TABLE>

<PAGE>

<TABLE>
<C>          <S>
10.87(39)    Agreement of Lease dated July 7, 1999 between McCarthy Associates Limited and the Registrant.

10.88(40)    Medarex, Inc. 1997 Stock Option Plan.

10.89(41)    Medarex, Inc. 1999 Stock Option Plan.

10.99(51)**  Agreement dated December 21, 1999 among the Registrant, GenPharm, and Immuno-Designed
             Molecules S.A.

10.100(52)** Agreement on Essential Terms for Collaboration effective as of December 27, 1999 among the
             Registrant, GenPharm and Kirin Brewery Co., Ltd.

10.104(57)   Medarex, Inc. 2000 Stock Option Plan.

10.105(58)   Medarex, Inc. 2000 Non-Director/Officer Employee Stock Option Plan.

10.106(59)   Medarex, Inc. 2001 Non-Director/Officer Employee Stock Option Plan.

10.107(60)   Medarex, Inc. 2001 Stock Option Plan.

21           Subsidiaries of the Registrant.

23.1         Consent of Ernst & Young LLP.

23.2         Consent of PricewaterhouseCoopers.

</TABLE>
--------
 (1) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Registration Statement on Form S-1 (File No. 33-39956) filed
     on April 12, 1991.
 (8) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Annual Report on Form 10-K filed on March 15, 1993.
 (9) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Post-Effective Amendment No. 5 to Registration Statement on
     Form S-1 (File No. 33-57366) filed on September 15, 1995.
(10) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Quarterly Report on Form 10-Q filed on May 14, 1993.
(11) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Quarterly Report on Form 10-Q filed on August 16, 1993.
(12) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Annual Report on Form 10-K filed on February 15, 1994.
(13) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Registration Statement on Form S-1 (File No. 33-75324) filed
     on June 28, 1994.
(18) Incorporated by reference to Exhibit 2.1 of the Registrant's Registration
     Statement on Form S-4 (File No. 333-20119) filed on January 22, 1997.
(23) Incorporated by reference to Exhibit Number 10.44 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(24) Incorporated by reference to Exhibit Number 10.45 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(25) Incorporated by reference to Exhibit Number 10.46 to Cell Genesys, Inc.'s
     Annual Report on Form 10-K/A filed on May 1, 1997.
(28) Incorporated by reference to Exhibit Number 2.1 to the Registrant's
     Registration Statement on Form S-4 (No. 333-29953) filed on June 25, 1997.
(30) Incorporated by reference to Exhibit Number 10.74 to the Registrant's
     current Report on Form 8-K filed on March 31, 1998.
(33) Incorporated by reference to the identically numbered exhibit to the
     Registrant's Current Report on Form 8-K filed on June 15, 1998.
(36) Incorporated by reference to Exhibit Number 10.80 to the Registrant's
     Current Report on Form 8-K filed on August 11, 1999.
(37) Incorporated by reference to Exhibit Number 10.81 to the Registrant's
     Current Report on Form 8-K filed on August 11, 1999.

<PAGE>

(39) Incorporated by reference to Exhibit Number 10.83 to the Registrant's
     Quarterly Report on Form 10-Q filed on August 13, 1999.
(40) Incorporated by reference to Exhibit Number 10.84 to the Registrant's
     Quarterly Report on Form 10-Q filed on August 13, 1999.
(41) Incorporated by reference to Exhibit Number 10.85 to the Registrant's
     Quarterly Report on Form 10-Q filed on August 13, 1999.
(51) Incorporated by reference to Exhibit Number 10.9 to the Registrant's
     Current Report on Form 8-K filed on January 26, 2000.
(52) Incorporated by reference to Exhibit Number 10.10 to the Registrant's
     Current Report on Form 8-K filed on January 26, 2000.
(56) Incorporated by reference to Exhibit Number 4(b) to the Registrant's
     Registration Statement on Form S-8 (File Number 333-39084) filed on June
     12, 2000.
(57) Incorporated by reference to Exhibit Number 10.1 to the Registrant's
     Registration Statement on Form S-8 (File Number 333-39084) filed on June
     12, 2000.
(58) Incorporated by reference to Exhibit No. 10.1 to Registrant's Registration
     Statement on Form S-8 (File Number 333-55222) filed on February 8, 2001.
(59) Incorporated by reference to Exhibit No. 10.1 to Registrant's Registration
     Statement on Form S-8 (File Number 333-55224) filed on February 8, 2001.
(60) Incorporated by reference to Exhibit No. 10.1 to Registrant's Registration
     Statement on Form S-8 (File Number 333-72154) filed on October 24, 2001.
--------
** Confidential treatment has been granted with respect to specified portions
   of this exhibit.

(b) Reports on Form 8-K

   None

<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 March   , 2002.

                                               MEDAREX, INC.

                                               By: DONALD L. DRAKEMAN
                                                   -----------------------------
                                                   Donald L. Drakeman President
                                                   and Chief Executive Officer

   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 in the capacities indicated and on the dates indicated.

Principal Executive Officer and Director:

<TABLE>
<S>                                          <C>                           <C>
                                                  DONALD L. DRAKEMAN
     Director, President and Chief           -------------------------
     Executive Officer                            Donald L. Drakeman       Date  March 28, 2002
</TABLE>

Principal Financial Officer
And Accounting Officer:

<TABLE>
<S>                                          <C>                           <C>
     Senior Vice President and Chief              CHRISTIAN S. SCHADE
     Financial Officer                       -------------------------
                                                  Christian S. Schade      Date  March 28, 2002
</TABLE>

Directors:

        IRWIN LERNER
-----------------------------
        Irwin Lerner
    Chairman of the Board     Date  March 28, 2002

    MICHAEL A. APPELBAUM
-----------------------------
    Michael A. Appelbaum      Date  March 28, 2002

         FRED CRAVES
-----------------------------
         Fred Craves          Date  March 28, 2002

      MICHAEL W. FANGER
-----------------------------
      Michael W. Fanger       Date  March 28, 2002

     RONALD J. SALDARINI
-----------------------------
     Ronald J. Saldarini      Date  March 28, 2002

      CHARLES SCHALLER
-----------------------------
      Charles Schaller        Date  March 28, 2002

       LEIGH THOMPSON
-----------------------------
       Leigh Thompson         Date  March 28, 2002

       JULIUS A. VIDA
-----------------------------
       Julius A. Vida         Date  March 28, 2002