UNITED STATES
        
        SECURITIES AND EXCHANGE COMMISSION
        
        WASHINGTON, D.C. 20549
        
        _________________
        FORM 10-Q
        
        ___________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        
        SECURITIES EXCHANGE ACT OF 1934
        
        For the quarterly period ended March 31, 2004
        Commission File No. 0-31261 ATHEROGENICS, INC. (Exact name of registrant as specified in its
        charter) Georgia

                    58-2108232(State of
                        incorporation)

                    (I.R.S. Employer
                        Identification Number)
 8995 Westside Parkway,
        Alpharetta,
        Georgia30004(Address of registrant's principal
        executive offices, including zip code)
        
        _______________________
        
        (Registrant's telephone number, including area code):
        (678) 336-2500 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 whether the registrant is an
        accelerated filer (as defined in Rule 12b-2 of the Act).
        Yes [ X ] No [   ] As of May 7, 2004 there were 37,010,252 shares of the
        registrant's common stock outstanding. _________________________    **ATHEROGENICS, INC.
        
         FORM 10-Q
        
        INDEX** PART I.  FINANCIAL
                    INFORMATION

                Page No.Item 1.  Financial Statements
                    (unaudited)Condensed
                    Balance SheetsMarch
                    31, 2004 and December 31,
                    2003

                3Condensed
                    Statements of OperationsThree
                    months ended March 31, 2004 and
                    2003

                4Condensed
                    Statements of Cash FlowsThree
                    months ended March 31, 2004 and
                    2003

                5Notes to
                    Condensed Financial
                    Statements

                6Item 2.  Management's Discussion
                    and Analysis of Financial Conditionand
                    Results of
                    Operations

                8Item 3.  Quantitative and Qualitative
                    Disclosures About Market
                    Risk

                13Item 4.  Controls and
                    Procedures

                13PART II.  OTHER INFORMATIONItem 6.  Exhibits and Reports on Form
                    8-K

                14SIGNATURES

                15 2    PART I - FINANCIAL
        INFORMATION Item 1.   Financial Statements  ATHEROGENICS, INC.
        CONDENSED BALANCE SHEETS March 31,

                

                December 31,2004

                

                2003(Unaudited)

                

                (Audited)ASSETSCurrent assets:Cash and cash
                    equivalents

                $  55,646,135

                

                $  72,058,249Short-term
                    investments

                59,876,330

                

                59,525,679Prepaid
                    expenses

                1,912,146

                

                1,144,006Notes
                    receivable and other current
                    assets

                545,109

                

                496,871Total
                    current
                    assets

                117,979,720

                

                133,224,805Equipment and leasehold improvements, net of
                    accumulateddepreciation
                    and
                    amortization

                2,373,270

                

                2,520,790Other
                    assets

                2,917,215

                

                3,091,151Total
                    assets

                $123,270,205

                

                $138,836,746LIABILITIES AND
                    SHAREHOLDERS' EQUITYCurrent liabilities:Accounts
                    payable

                $
                       3,764,948

                

                $   1,778,187Accrued
                    research and development
                    costs

                2,181,873

                

                2,961,085Accrued
                    liabilities

                1,026,308

                

                2,118,500Accrued
                    compensation

                534,209

                

                1,038,907Current
                    portion of equipment loan facility

                393,873

                

                479,439Total
                    current
                    liabilities

                7,901,211

                

                8,376,118Convertible notes
                    payable

                100,000,000

                

                100,000,000Equipment loan facility, net of current
                    portion

                52,751

                

                83,622Shareholders' equity:Preferred
                    stock, no par value:  Authorized -
                    5,000,000 shares

                --

                

                --Common stock,
                    no par value:  Authorized -
                    100,000,000shares;
                    issued and outstanding – 36,991,003
                    and36,763,407
                    shares at March 31, 2004 andDecember
                    31, 2003,
                    respectively

                173,970,112

                

                172,452,536Warrants

                1,092,448

                

                950,588Deferred stock
                    compensation

                (636,924

                )

                (505,708

                )Accumulated
                    deficit

                (159,134,015

                )

                (142,531,315

                )Accumulated
                    other comprehensive
                    income

                24,622

                

                10,905Total
                    shareholders'
                    equity

                15,316,243

                

                30,377,006Total
                    liabilities and shareholders'
                    equity

                $123,270,205

                

                $138,836,746 The accompanying notes are an integral part of these
        condensed financial statements. 3    ATHEROGENICS, INC.
        
        CONDENSED STATEMENTS OF OPERATIONS
        
        (Unaudited)  Three months endedMarch 31,2004

                

                2003Revenues

                $                --

                

                $                --Operating expenses:Research and
                    development

                13,999,531

                

                10,338,278General and
                    administrative

                1,681,316

                

                1,334,085Total
                    operating
                    expenses

                15,680,847

                

                11,672,363Operating
                    loss

                (15,680,847

                )

                (11,672,363

                )Interest
                    income

                370,988

                

                196,293Interest
                    expense

                (1,292,841

                )

                (18,631

                )Net
                    loss

                $(16,602,700

                )

                $(11,494,701

                )Net loss per share -basic and
                    diluted

                $          
                    (0.45

                )

                $          
                    (0.35

                )Weighted average sharesoutstanding -
                    basic and
                    diluted

                36,866,673

                

                33,293,017 The accompanying notes are an integral part of these
        condensed financial statements. 4    ATHEROGENICS, INC.
        
        CONDENSED STATEMENTS OF CASH FLOWS
        
        (Unaudited) Three months endedMarch 31,2004

                

                2003Operating activities:Net
                    loss

                $(16,602,700

                )

                $(11,494,701

                )Adjustments to reconcile net loss to net
                    cash used inoperating activities:Depreciation
                    and
                    amortization

                223,669

                

                198,484Amortization
                    of debt issuance
                    costs

                163,245

                

                --Amortization
                    of deferred stock
                    compensation

                121,364

                

                320,670Changes in
                    operating assets and liabilities:Prepaid
                    expenses

                (768,140

                )

                (210,696

                )Notes
                    receivable and other current
                    assets

                (37,547

                )

                (18,344

                )Accounts
                    payable

                1,986,761

                

                692,471Accrued
                    research and
                    development

                (779,212

                )

                1,138,668Accrued
                    liabilities and
                    compensation

                (1,596,890

                )

                (486,953

                )Net
                    cash used in operating
                    activities

                (17,289,450

                )

                (9,860,401

                )Investing activities:Purchases of short-term
                    investments

                (336,934

                )

                (15,597,969

                )Purchases of equipment and leasehold
                    improvements

                (76,149

                )

                (74,824

                )Net
                    cash used in investing
                    activities

                (413,083

                )

                (15,672,793

                )Financing activities:Proceeds from the issuance of common
                    stock

                --

                

                48,395,000Proceeds from the exercise of common stock
                    options

                1,406,856

                

                26,074Payments on equipment loan
                    facility

                (116,437

                )

                (107,847

                )Net
                    cash provided by financing
                    activities

                1,290,419

                

                48,313,227(Decrease) increase in cash and cash
                    equivalents

                (16,412,114

                )

                22,780,033Cash and cash equivalents at beginning of
                    period

                72,058,249

                

                32,132,329Cash and cash equivalents at end of
                    period

                $ 55,646,135

                

                $ 54,912,362Supplemental disclosures of cash flow
                    information:Interest
                    paid

                $   2,410,051

                

                $       18,631Re-measurement adjustment for variable
                    options and warrants issuedfor technology license
                    agreements and consulting
                    agreements

                $      252,580

                

                $    
                    223,570  The accompanying notes are an integral part of these
        condensed financial statements.  5    ATHEROGENICS, INC.
        
         NOTES TO CONDENSED FINANCIAL STATEMENTS
        
        (Unaudited) 1.   Organization and Nature of Operations
        AtheroGenics, Inc. (“AtheroGenics”) was
        incorporated on November 23, 1993 (date of inception) in
        the State of Georgia to focus on the discovery, development
        and commercialization of novel therapeutics for the
        treatment of chronic inflammatory diseases, such as heart
        disease (atherosclerosis), rheumatoid arthritis and
        asthma.2.   Basis of Presentation
        
                       
        The accompanying unaudited condensed financial statements
        reflect all adjustments (consisting solely of normal
        recurring adjustments) which management considers necessary
        for a fair presentation of the financial position, results
        of operations and cash flows of AtheroGenics for the
        interim periods presented.  Certain footnote
        disclosures normally included in financial statements
        prepared in accordance with accounting principles generally
        accepted in the United States have been condensed or
        omitted from the interim financial statements as permitted
        by the rules and regulations of the Securities and Exchange
        Commission.  Interim results are not necessarily
        indicative of results for the full year. 
        
                       
        The interim results should be read in conjunction with the
        financial statements and notes thereto included in
        AtheroGenics' Annual Report on Form 10-K for the year
        ended December 31, 2003.  Shareholders are encouraged
        to review the Form 10-K for a broader discussion of
        AtheroGenics' opportunities and risks inherent in the
        business.  Copies of the Form 10-K are available on
        request.
        3**.   Net Loss per Share**
        
                       
        The Financial Accounting Standards Board’s SFAS No.
        128, Earnings per Share, requires presentation of
        both basic and diluted earnings per share.  Basic
        earnings per share is computed by dividing net income
        (loss) by the weighted average number of shares of common
        stock outstanding during the period.  Diluted earnings
        per share is computed in the same manner as basic earnings
        per share except that diluted earnings per share reflects
        the potential dilution that would occur if outstanding
        options, warrants and convertible notes were
        exercised.  Because AtheroGenics reported a net loss
        for all periods presented, shares associated with stock
        options, warrants and convertible note are not included
        because they are antidilutive.  Basic and diluted net
        loss per share amounts are the same for the periods
        presented.
        4.   Stock‐Based Compensation
        AtheroGenics has elected to follow Accounting Principles
        Board ("APB") Opinion No. 25, Accounting for
        Stock Issued to Employees ("APB 25"), in
        accounting for its stock‐based employee compensation
        plans, rather than the alternative fair value accounting
        method provided for under SFAS No. 123, Accounting for
        Stock-Based Compensation (“SFAS 123”), as
        SFAS 123 requires the use of option valuation models that
        were not developed for use in valuing employee stock
        options.  AtheroGenics accounts for transactions in
        which services are received in exchange for equity
        instruments based on the fair value of such services
        received from non‐employees, in accordance with SFAS
        123 and Emerging Issues Task Force (“EITF”)
        Issue No. 96‐18, Accounting for Equity
        Instruments that are Issued to Other than Employees for
        Acquiring, or in Conjunction with Selling, Goods or
        Services.SFAS No. 148, Accounting for
        Stock-Based Compensation – Transition and
        Disclosure (“SFAS 148”), an amendment to
        SFAS 123, requires disclosure in the summary of significant
        accounting policies of the effects of  the fair value
        of stock-based employee compensation on reported net income
        and earnings per share in annual and interim financial
        statements. 6    The following table illustrates the effect on net loss and
        net loss per share if the fair value based method had been
        applied to all outstanding and unvested options in each
        period, based on the provisions of SFAS 123 and SFAS
        148. Three months endedMarch 31,2004

                

                2003Net loss, as
                    reported

                $(16,602,700

                )

                $(11,494,701

                )Add:  Stock-based employee
                    compensationexpense included in reported
                    net
                    loss

                12,035

                

                140,793Deduct:  Total stock-based employeecompensation expense determined
                    underfair value based method for all
                    awards

                (1,190,629

                )

                (895,320

                )Pro forma net
                    loss

                $(17,781,294

                )

                $(12,249,228

                )Net loss per share:Basic and diluted, as
                    reported

                $          
                    (0.45

                )

                $        
                    (0.35

                )Basic and diluted, pro
                    forma

                $          
                    (0.48

                )

                $        
                    (0.37

                ) 5.   Convertible Notes Payable
        In August 2003, AtheroGenics issued $100 million in
        aggregate principal amount of 4.5% convertible notes due
        September 1, 2008 with interest payable semi-annually
        in March and September.  Net proceeds to AtheroGenics
        were approximately $96.7 million, after deducting expenses
        and underwriter’s discounts and commissions. 
        AtheroGenics recorded issuance costs related to the notes
        of approximately $3.3 million.  These costs are
        recorded as other assets and are being amortized to
        interest expense over the five-year life of the notes.
        
                       
        The notes may be converted at the option of the holder into
        shares of AtheroGenics’ common stock prior to the
        close of business on September 1, 2008 at a conversion rate
        of 65.1890 shares per $1,000 principal amount of notes,
        representing a conversion price of approximately $15.34,
        subject to adjustment.  Under certain circumstances,
        AtheroGenics may be obligated to redeem all or part of the
        notes prior to their maturity at a redemption price equal
        to 100% of their principal amount, plus accrued and unpaid
        interest and liquidated damages, if any, up to but
        excluding the maturity date. 
        
                       
        AtheroGenics filed a shelf registration statement with the
        Securities and Exchange Commission (“SEC”) that
        was declared effective on December 22, 2003 covering the
        resale of the notes and the common stock issuable upon
        conversion of the notes.  AtheroGenics has agreed to
        use its reasonable best efforts to keep the shelf
        registration statement effective until the earlier of:
         (1) the date that all of the registrable securities
        have been sold pursuant to the shelf registration statement
        or pursuant to Rule 144 under the Securities Act or any
        similar provision then in force; or (2) the expiration of
        the holding period with respect to the registrable
        securities under Rule 144(k) under the Securities Act of
        1933, or any successor provision.
        
                       
        As of March 31, 2004, AtheroGenics had reserved 6,518,900
        shares of common stock for future issuance in connection
        with the convertible notes.  In addition, as of March
        31, 2004, accrued liabilities included approximately
        $375,000 of accrued interest related to the convertible
        notes. 7    6.   Bank Credit Agreements
        
                       
        In March 2002, AtheroGenics entered into a revolving credit
        facility with Silicon Valley Bank for up to a maximum
        amount of $5,000,000 to be used for working capital
        requirements.  In December 2003, AtheroGenics canceled
        the line of credit, which was unused during the entire
        period.
        
                       
        In addition, in March 2002, AtheroGenics entered into an
        equipment loan facility with Silicon Valley Bank for up to
        a maximum amount of $2,500,000 to be used to finance
        existing and new equipment purchases.  Amounts
        borrowed under the equipment loan facility are repaid in 33
        equal installments of principal and interest beginning on
        the first business day of the month following an
        advance.  As of March 31, 2004, there was an
        outstanding balance of $446,624 under the equipment loan
        facility and the weighted average interest rate was 7.7%
        per year.  The borrowing period for the equipment loan
        facility expired in September 2003.
        
                       
        In connection with the revolving credit facility and the
        equipment loan facility, AtheroGenics has granted to
        Silicon Valley Bank a negative pledge on its intellectual
        property and on deposits with Silicon Valley Bank and its
        affiliates.
        7.   Reclassifications
        
                       
        Certain prior year balances have been reclassified to
        conform to the current year presentation.  These
        reclassifications had no effect on previously reported net
        loss or shareholders’ equity.
        Item 2.   Management's Discussion and
        Analysis of Financial Condition and Results of Operations
        
                       
        The following should be read with the financial
        statements and related footnotes and Management's
        Discussion and Analysis of Financial Condition and Results
        of Operations included in AtheroGenics' Annual Report
        on Form 10-K for the fiscal year ended December 31,
        2003.  The results discussed below are not necessarily
        indicative of the results to be expected in any future
        periods.  The following discussion contains
        forward-looking statements that are subject to risks and
        uncertainties which could cause actual results to differ
        from the statements made.  These risks are set forth
        in more detail in our Annual Report on Form 10-K.
        OVERVIEW
        
                       
        Since our operations began in 1994, we have focused on the
        discovery, development and commercialization of novel drugs
        for the treatment of chronic inflammatory diseases,
        including heart disease (atherosclerosis), rheumatoid
        arthritis and asthma.  Based on our proprietary
        vascular protectant, or v-protectantTM, technology
        platform, we have four drug programs in the clinic, and are
        pursuing a number of other preclinical programs.
        
                       
        AGI-1067 is our v-protectantTM candidate that is most
        advanced in clinical development, and is designed to
        benefit patients with heart disease.  AGI-1067 is
        currently in a Phase III clinical trial, referred to as
        ARISE, or Aggressive Reduction of Inflammation Stops
        Events, to evaluate the impact of AGI-1067 on important
        outcome measures such as death due to heart disease,
        myocardial infarction, stroke, coronary revascularization
        and unstable angina in patients who have coronary heart
        disease. ARISE, which began enrollment in June 2003, will
        enroll 4,000 patients who will be followed for an average
        of 18 months or until a minimum of 1,160 primary events, or
        outcome measures, have occurred.  We are currently
        conducting a Phase IIb clinical trial called CART-2, which
        is a 500-patient study that examines the effect of 12
        months of AGI-1067 therapy on atherosclerosis and
        post-angioplasty restenosis.  We completed enrollment
        in CART-2 in August 2003 and expect to complete the
        treatment phase in mid-2004, after which we will proceed
        with data analysis and disclosure of the results.  8    Our second clinical compound, AGIX-4207, is a novel oral
        agent being developed for the treatment of the signs and
        symptoms of rheumatoid arthritis.  We have completed a
        Phase II clinical trial that evaluated safety, tolerability
        and the effect of orally administered AGIX-4207 on
        biological markers of inflammation in rheumatoid
        arthritis patients.  Data from the trial demonstrated
        that treatment with AGIX-4207 was safe and well tolerated
        by patients and also inhibited an increase in the
        inflammatory biomarker known as the erythrocyte
        sedimentation rate, or ESR, by more than 90 percent. 
        We have completed the treatment phase of a 275 patient
        Phase II trial of AGIX-4207, called OSCAR, or Oral
        Suppression of Cellular Inflammation Attenuates Rheumatoid
        Arthritis.  OSCAR will evaluate the impact of various
        doses of AGIX-4207 versus placebo on clinical efficacy,
        biomarkers and safety in patients with rheumatoid
        arthritis.  We expect to announce results from the
        trial in the third quarter.
        
                       
        AGIX-4207 I.V., our third v-protectantTM candidate, is
        an intravenous drug designed to treat rheumatoid arthritis
        patients in whom the rapid attainment of target drug levels
        in the blood is desirable.  We have completed a Phase
        I clinical trial that assessed the safety and tolerability
        of AGIX-4207 I.V. in healthy volunteers.  The results
        from this trial demonstrated that single infusions of
        AGIX-4207 I.V. were well tolerated and adverse events were
        generally mild and not considered clinically
        significant. 
        
                        
        Our fourth v-protectantTM drug, AGI-1096, is a novel
        antioxidant and selective anti-inflammatory agent that is
        being developed to address the accelerated inflammation of
        grafted blood vessels common in chronic organ transplant
        rejection and known as transplant arteritis.  We have
        completed a Phase I clinical trial that assessed safety and
        tolerability of AGI-1096 in healthy volunteers.  The
        results of AGI-1096 clinical trial data demonstrated the
        drug was well tolerated at all oral doses, with no
        drug-related adverse events.  We are currently in
        collaboration with Fujisawa Pharmaceutical Co., Ltd to
        further develop AGI-1096.
        
                       
        To date, we have devoted substantially all of our resources
        to research and development.  We have not received any
        commercial revenues from product sales.  We expect to
        incur significant losses in most years prior to deriving
        any product revenue as we continue to increase research and
        development costs.  We have incurred significant
        losses since we began operations in 1994 and as of March
        31, 2004, we had an accumulated deficit of $159.1
        million.  We cannot assure you that we will become
        profitable.  We expect that losses will fluctuate from
        quarter to quarter and that these fluctuations may be
        substantial.  Our ability to achieve profitability
        depends upon a variety of factors, including our ability,
        alone or with others, to complete the successful
        development of our product candidates, to obtain required
        regulatory clearances, and to manufacture and market our
        future products.
        CRITICAL ACCOUNTING POLICIES               
        AtheroGenics considers certain accounting policies related
        to use of estimates, research and development accruals,
        revenue recognition and stock based compensation to be
        critical policies.  There have been no material
        changes in the critical accounting policies from what was
        previously disclosed in AtheroGenics’ Annual Report
        on Form 10-K for the year ended December 31, 2003 filed
        with the Securities and Exchange Commission on March 15,
        2004.
        RESULTS OF OPERATIONS
        Comparison of the Three Month Periods Ended March 31, 2004
        and 2003
        Revenues
        
                       
        There were no revenues during the three months ended March
        31, 2004 and 2003. 9    Expenses
        
                       
        Research and Development.  Research and
        development expenses increased 35% to $14.0 million for the
        three months ended March 31, 2004 from $10.3 million for
        the comparable period in 2003.  The increase in
        research and development expenses for the three months
        ended March 31, 2004 was primarily due to expenditures
        related to ongoing patient recruitment and new clinical
        development staff hires to support the AGI-1067 ARISE
        clinical trial. In addition, there were increased expenditures for
        the ongoing AGIX-4207 OSCAR Phase II clinical trial and the
        ongoing AGI-1067 CART-2 Phase IIb clinical trial.
        
                       
        General and Administrative.  General and
        administrative expenses increased 26% to $1.7 million for
        the three months ended March 31, 2004 from $1.3 million for
        the comparable period in 2003.  The increase in
        general and administrative expenses for the three months
        ended March 31, 2004 was primarily due to higher insurance
        premiums and business development expenses related to
        potential partnership activities.
        Interest Income
        
                       
        Interest income was $370,988 for the three months ended
        March 31, 2004 and $196,293 for the comparable period in
        2003.  The increase in interest income in the three
        month period ended March 31, 2004 is due to the increased
        amount of invested funds received from the $100.0 million
        convertible debt offering in August 2003.
        Interest Expense
        
                       
        Interest expense was $1.3 million for the three months
        ended March 31, 2004 and $18,631 for the comparable period
        in 2003.  The increase in interest expense is due to
        our $100.0 million convertible debt.
        LIQUIDITY AND CAPITAL RESOURCES
        
                       
        Since inception, we have financed our operations primarily
        through sales of equity securities and convertible
        notes.  At March 31, 2004, we had cash, cash
        equivalents and short-term investments of $115.5 million,
        compared with $131.6 million at December 31, 2003. 
        Working capital at March 31, 2004 was $110.1 million,
        compared to $124.8 million at December 31, 2003.  The
        decrease in cash, cash equivalents, short-term investments
        and working capital is primarily due to use of funds for
        operating purposes.
        
                       
        Net cash used in operating activities was $17.3 million for
        the three months ended March 31, 2004, compared to $9.9
        million for the comparable period in 2003.  The
        increase in the use of cash in operating activities is
        principally due to funding a net loss of $16.6
        million.  The increase in cash to fund the net loss is
        primarily attributable to the expenditures for our ARISE
        Phase III clinical trial, our CART-2 Phase IIb clinical
        trial for AGI-1067 and our OSCAR Phase II clinical trial
        for AGIX-4207, as well as other ongoing product development
        activities.  Prepaid expenses will continue to
        fluctuate as pre-payments are made to contractors for the
        ARISE clinical trial and are then expensed as services are
        performed.  We anticipate net cash usage in 2004 for
        ARISE and our other ongoing clinical programs, as well as
        our other operating activities, to be in a range of $63.0
        million to $67.0 million, subject to the impact of a
        potential corporate partnering arrangement for
        AGI-1067. 
        
                       
        Net cash used in investing activities was $413,083 for the
        three months ended March 31, 2004, compared to $15.7
        million for the comparable period in 2003.  Net cash
        used in investing activities during the three months ended
        March 31, 2004 and 2003 consisted primarily of the
        purchases of available-for-sale securities and equipment
        and leasehold improvements.  
        
                       
        Net cash provided by financing activities was $1.3 million
        for the three months ended March 31, 2004, and $48.3
        million for the comparable period in 2003.  Net cash
        provided by financing activities in the three months ended
        March 31, 2004 consisted primarily of proceeds from the
        exercise of common stock options.  Net cash 10   provided by financing activities for the comparable
        period in 2003 was primarily from the follow-on public
        offering of 8.3 million shares of our common stock. 
        This was partially offset by payments on our equipment loan
        facility.
        
                       
        In March 2002, we entered into a revolving credit facility
        with Silicon Valley Bank (the “Bank") for up to
        a maximum amount of $5.0 million to be used for working
        capital requirements.  The revolving credit facility
        was not used, and as such, we terminated it in December
        2003.  We also entered into an equipment loan
        facility, as modified in June 2003, with the Bank for up to
        a maximum amount of $2.5 million to be used to finance
        existing and new equipment purchases.  The borrowing
        period under the equipment loan facility, as modified,
        expired on September 30, 2003.  At March 31,
        2004, there was an outstanding balance of approximately
        $446,624 on the equipment loan facility and the weighted
        average interest rate was 7.7% per year.
        
                       
        In August 2003, AtheroGenics issued $100 million in
        aggregate principal amount of 4.5% convertible notes due in
        2008 through a Rule 144A private placement to qualified
        institutional buyers.  These notes initially are
        convertible into our common stock at a conversion rate of
        65.1890 shares per $1,000 principal amount of notes, or
        approximately $15.34 per share.  Net proceeds were
        approximately $96.7 million.  We are using the net
        proceeds from the sale of the notes for research and
        development activities, including clinical trials, process
        development and manufacturing support, and for general
        corporate purposes, including working capital. 
        Pending these uses, the net proceeds have been invested in
        interest-bearing, investment grade securities. 
        
                       
        The following table summarizes our long-term contractual
        obligations as of March 31, 2004. Payments Due by
                    PeriodTotal

                

                2004

                

                2005-2006

                

                2007-2008

                

                ThereafterContractual obligationsOperating leases, net ofsublease
                    income

                $    5,464,710

                

                $
                    805,274

                

                $2,152,011

                

                $   
                    2,314,723

                

                $192,702Long-term
                    debt

                100,446,624

                

                393,873

                

                52,751

                

                100,000,000

                

                --Total contractualobligations

                $105,911,334

                

                $1,199,147

                

                $2,204,762

                

                $102,314,723

                

                $192,702  Based upon the current status of our product development
        and commercialization plans, we believe that our existing
        cash and cash equivalents and short-term investments will
        be adequate to satisfy our capital needs for at least the
        next 12 months.  However, our actual capital
        requirements will depend on many factors, including: -

                the status of product development;-

                the time and cost involved in conducting
                    clinical trials and obtaining regulatory
                    approvals;-

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

                competing technological and market
                    developments; and-

                our ability to establish new licensing and
                    partnering agreements. We have historically accessed the capital markets from time
        to time to raise adequate funds for operating needs and
        cash reserves.  Although we believe we have adequate
        cash for at least the next 12 months, we may access capital
        markets when we believe market conditions or company needs
        merit doing so. 11    FORWARD-LOOKING STATEMENTS
        
                       
        The Private Securities Litigation Reform Act of 1995 (the
        "Reform Act") provides a safe harbor for
        forward-looking statements made by or on behalf of
        AtheroGenics.  AtheroGenics and its representatives
        may from time to time make written or oral forward-looking
        statements, including statements contained in this report
        and our other filings with the Securities and Exchange
        Commission and in our reports to our shareholders. 
        Generally, the words "believe,"
        "expect," "intend,"
        "estimate," "anticipate,"
        "will" and similar expressions identify
        forward-looking statements.  All statements which
        address operating performance, events or developments that
        we expect or anticipate will occur in the future, such as
        projections about our future results of operations or our
        financial condition, research, development and
        commercialization of our product candidates and anticipated
        trends in our business, are forward-looking statements
        within the meaning of the Reform Act.  The
        forward-looking statements are and will be based on
        management's then current views and assumptions
        regarding future events and operating performance, and
        speak only as of their dates.  AtheroGenics undertakes
        no obligation to publicly update or revise any
        forward-looking statements, whether as a result of new
        information, future events or otherwise.
        
                       
        The following are some of the factors that could affect our
        financial performance or could cause actual results to
        differ materially from those expressed or implied in our
        forward-looking statements: -

                AGI-1067, AGIX-4207, AGIX-4207 I.V. and
                    AGI-1096 may fail in clinical trials;-

                our ability to generate positive cash flow
                    in light of our history of operating
                    losses;-

                our inability to obtain additional financing
                    on satisfactory terms, which could preclude us
                    fromdeveloping or marketing our products;-

                our ability to successfully develop our
                    other product candidates;-

                our ability to commercialize our product
                    candidates if we fail to demonstrate adequately
                    their safetyand efficacy;-

                possible delays in our clinical trials;-

                our inability to predict whether or when we
                    will obtain regulatory approval to
                    commercialize ourproduct candidates or the timing of any
                    future revenue from these product
                    candidates;-

                our need to comply with applicable
                    regulatory requirements in the manufacture and
                    distribution ofour products to avoid incurring penalties
                    that may inhibit our ability to commercialize
                    our products;-

                our ability to protect adequately or enforce
                    our intellectual property rights or secure
                    rights to thirdparty patents;-

                the ability of our competitors to develop
                    and market anti-inflammatory products that are
                    moreeffective, have fewer side effects or are
                    less expensive than our current or future
                    product candidates;-

                third parties' failure to synthesize and
                    manufacture our product candidates, which could
                    delay ourclinical trials or hinder our
                    commercialization prospects;-

                our ability to create sales, marketing and
                    distribution capabilities or enter into
                    agreements with thirdparties to perform these functions; 12     -

                our ability to attract, retain and motivate
                    skilled personnel and cultivate key academic
                    collaborations;-

                our ability to obtain an adequate level of
                    reimbursement or acceptable prices for our
                    products;-

                if plaintiffs bring product liability
                    lawsuits against us, we may incur substantial
                    financial loss or maybe unable to obtain future product liability
                    insurance at reasonable prices, if at all,
                    either of whichcould diminish our ability to commercialize
                    our future products; and-

                conversion of our $100 million principal
                    amount, 4.5% convertible notes will dilute the
                    ownershipinterest of existing shareholders and could
                    adversely affect the market price of our common
                    stock. The foregoing list of important factors is discussed in
        more detail in our Annual Report on Form 10-K for the
        fiscal year ended December 31, 2003 and is not exclusive.
        Item 3.Quantitative And Qualitative
        Disclosures About Market Risk
        
                       
        Market risk represents the risk of loss that may impact our
        financial position, operating results or cash flows due to
        changes in U.S. interest rates.  This exposure is
        directly related to our normal operating activities. 
        Our cash, cash equivalents and short-term investments are
        invested with high quality issuers and are generally of a
        short-term nature.  Interest rates payable on our
        lease obligations are generally fixed.  As a result,
        we do not believe that near-term changes in interest rates
        will have a material effect on our future results of
        operations.
        
                       
        The following table summarizes information on our equipment
        loan facility and convertible notes.  The table
        presents maturity of the debt and projected annual average
        interest rates as of March 31, 2004. Value as of2004

                

                2005-2006

                

                2007-2008

                

                Total

                

                March 31,

                    2004Long-term debt-fixed rateMaturity

                $393,873

                

                $52,751

                

                $100,000,000

                

                $100,446,624

                

                $173,446,624Average interest
                    rate

                7.7%

                

                7.7%

                

                4.5% Item 4.Controls and ProceduresEvaluation of disclosure controls and procedures. 
        Our chief executive officer and chief financial officer are
        responsible for establishing and maintaining
        "disclosure controls and procedures" (as defined
        in the Securities Exchange Act of 1934 Rules 13a-15(e) and
        15d-15(e)) for AtheroGenics.  Our chief executive
        officer and chief financial officer, after evaluating the
        effectiveness of our disclosure controls and procedures as
        of the end of the period covered by this quarterly report,
        have concluded that our disclosure controls and procedures
        are adequate and effective in timely alerting them to
        material information relating to us required to be included
        in our periodic SEC filings.
        
                       
        Changes in internal control over financial
        reporting.  There were no material changes in our
        internal control over financial reporting that occurred
        during our most recent fiscal quarter that have materially
        affected, or are reasonably likely to materially affect,
        our internal control over financial reporting. 13    PART II - OTHER INFORMATION Item 6.  Exhibits and Reports on Form 8-K
        
        (a)  Exhibits Exhibit 31.1

                -

                Certifications of Chief Executive Officer
                    under Rule 13a-14(a).Exhibit 31.2

                -

                Certifications of Chief Financial Officer
                    under Rule 13a-14(a).Exhibit 32

                -

                Certifications of Chief Executive Officer
                    and Chief Financial Officer under Section
                    1350. (b)  Reports on Form 8-K
        
                       
        On February 11, 2004, we furnished a Current Report on Form
        8-K under Item 12, reporting the issuance of our press
        release announcing our financial results for the quarter
        and year ended December 31, 2003. 14    SIGNATURES Pursuant to the requirements 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.  ATHEROGENICS, INC.Date:  May 10,
                    2004

                /s/  MARK P.
                    COLONNESEMark P. ColonneseSenior Vice President of Finance andAdministration and Chief
                    Financial Officer  15