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


                                     FORM 10-Q

                                   (Mark One)

           [X]   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

            For the quarterly period ended September 30, 1998

                                   OR

           [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-19635


                               GENTA INCORPORATED
   (Exact name of Registrant as specified in its certificate of incorporation)

         Delaware                                 33-0326866
(State or other jurisdiction of                (I.R.S. Employer
incorporation or organization)                Identification Number)


   3550 General Atomics Court
   San Diego, California                            92121
(Address of principal executive offices)          (Zip Code)


                                 (619) 455-2700
              (Registrant's telephone number, including area code)


        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 
                           ---        ---  

  As of November 10, 1998, the  registrant had 9,274,964 shares of common stock
outstanding.

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<PAGE>

                               Genta Incorporated
                               INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S>       <C>                                                             <C>    

PART I.        FINANCIAL INFORMATION                                            Page
                                                                                ----

Item 1.        Financial Statements (Unaudited)

               Condensed Consolidated Balance Sheets at September 30, 1998
                      and December 31, 1997                                       3

               Condensed Consolidated Statements of Operations for the
                      Three and Nine Months Ended September 30, 1998 and 1997     4

               Condensed Consolidated Statements of Cash Flows for the
                      Nine Months Ended September 30, 1998 and 1997               5

               Notes to Condensed Consolidated Financial Statements               6

Item 2.        Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                          8


PART II.       OTHER INFORMATION

Item 1.        Legal Proceedings                                                 25

Item 5.        Other Information                                                 26

Item 6.        Exhibits and Reports on Form 8-K                                  26


SIGNATURES                                                                       27
</TABLE>


<PAGE>

Genta Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998
(UNAUDITED)

<TABLE>
<CAPTION>

                                                              SEPTEMBER 30          DECEMBER 31
                                                          ------------------    ------------------
                                                                  1998                  1997
                        ASSETS                            ------------------    ------------------
<S>                                               <C>                       <C>    

Current assets:                                                                                      
  Cash and cash equivalents............................          $   288,815           $ 1,202,668
  Short term investments...............................            3,477,353             7,253,756
  Trade accounts receivable............................              895,662               431,046
  Inventories..........................................              958,806               826,008
  Other current assets.................................              243,899               218,513
                                                          ------------------    ------------------
Total current assets...................................            5,864,535             9,931,991
                                                          ------------------    ------------------
Property and equipment, net............................            1,408,663             1,718,150
Intangibles, net.......................................            2,920,774             3,390,032
Deposits and other assets..............................              702,080               713,730
                                                          ------------------    ------------------
                                                                 $10,896,052           $15,753,903
                                                          ==================    ==================
Total Assets                                              

         LIABILITIES AND STOCKHOLDERS' EQUITY                                                        

Current liabilities:                                                                                 
  Accounts payable.....................................          $   547,025           $   849,108
  Payable to Research Institution......................              635,661               635,661
  Accrued payroll payable..............................               88,105               548,295
  Other accrued expenses...............................              686,782               992,660
  Deferred revenue.....................................               50,000               198,570
  Current portion of notes payable and
    capital lease obligations..........................            1,113,870               900,558
                                                          ------------------    ------------------
Total current liabilities..............................          $ 3,121,443           $ 4,124,852
                                                          ------------------    ------------------
Notes payable, less current portion....................                    -                     -
Deficit in joint venture...............................            3,064,423             2,204,053
Stockholders' equity:
  Preferred stock:  5,000,000 shares authorized;
    Series A Convertible Preferred Stock, $.001 par value:
    451,100 and 456,600 shares issued and outstanding at
    September 30, 1998 and December 31, 1997, respectively,
    liquidation value is $27,066,000 at September 30, 1998               451                   457
  Series D Convertible Preferred Stock, $.001 par value:
    206,185 and 226,995 shares issued and outstanding at 
    September 30, 1998 and December 31, 1997, respectively, 
    liquidation value is $27,865,900 at September 30, 1998...            203                   227
  Common stock, $.001 par value:  70,000,000 shares
    authorized; 8,264,430 and 5,712,364 shares issued and
    outstanding at September 30, 1998 and December 31,
      1998 and December 31, 1997, respectively.........                8,265                 5,712
  Additional paid-in capital...........................          129,372,970           129,320,493
  Accumulated deficit..................................         (129,182,703)         (124,467,891)
  Accrued dividends payable............................            4,511,000             4,566,000

Total stockholders' equity.............................            4,710,186             9,424,998
                                                          ------------------    ------------------
Total Liabilities and Stockholders' Equity.............          $10,896,052           $15,753,903
                                                          ==================    ==================
</TABLE>


                            (See Accompanying Notes)

                                      - 3 -

<PAGE>

Genta Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>


                                      Quarters Ended September 30,           Nine Months Ended September 30,
                                     ----------------------------            ------------------------------
                                         1998            1997                    1998             1997
                                                      (restated)                               (restated)
                                     ------------    ------------            ------------    --------------
<S>                                  <C>             <C>                     <C>             <C>           
Revenues:
  Product sales....................  $  1,466,912    $  1,206,883            $  4,101,458    $    3,458,936
  Contract Revenue from Genta Jago.        17,396          87,524                  52,188           262,573
  Collaborative research and                                                                                   
     development...................        15,860               -                  40,292            50,000
                                     ------------    ------------            ------------    --------------

                                     $  1,500,168    $  1,294,407            $  4,193,938    $    3,721,509
                                     ------------    ------------            ------------    --------------
Cost and expenses:
  Cost of products sold............  $    729,368    $    834,759            $  2,338,282    $    2,339,845
  Research and development.........       354,649       2,236,334               1,788,383         4,484,957
  Selling, general and                                                                                         
     administrative................     1,393,274       1,964,330               4,203,481         5,538,919
                                     ------------    ------------            ------------    --------------

                                     $  2,477,291    $  5,035,423            $  8,330,146    $   12,363,721
                                     ------------    ------------            ------------    --------------
Loss from operations...............  $   (977,123)   $ (3,741,016)           $ (4,136,208)   $   (8,642,212)
Equity in net loss of joint venture      (286,790)       (144,533)               (860,370)         (925,055)
Other income (expense):
  Interest and other income........        91,452         223,176                 275,118           427,020
  Interest expense.................        (3,480)       (889,940)                (10,749)       (2,431,189)
                                     ------------    ------------            ------------    --------------
Sub Total Other Income (Expense)...        87,972        (666,764)                264,369        (2,004,169)
                                     ------------    ------------            ------------    --------------
Net loss...........................  $ (1,175,941)   $ (4,552,313)           $ (4,732,209)   $  (11,571,436)
Dividends Accrued on Preferred Stock            -        (542,183)                      -        (1,690,501)
Dividends Imputed on Preferred Stock            -               -                       -       (16,158,000)
                                     ------------    ------------            ------------    --------------
Net loss applicable to common shares $ (1,175,941)   $ (5,094,496)           $ (4,732,209)   $  (29,419,937)
                                     ============    ============            ============    ===============  
Net loss per common share..........  $       (.15)   $      (1.14)           $       (.59)   $         (6.92)
                                     ============    ============            ============    ===============  
Shares used in computing net loss                                                                              
  per common share.................     8,021,411       4,451,289               7,974,363          4,249,782
                                     ============    ============            ============    ===============  

</TABLE>

                                      (See Accompanying Notes)



                                      - 4 -




<PAGE>

Genta Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>

                                                               Nine Months Ended September 30,
                                                               -------------------------------
                                                                    1998               1997
                                                                    ----               ----
                                                                                    (Restated)
                                                                                    ----------
<S>                                                    <C>                   <C> 

Operating activities
Net Loss                                                       $  (4,732,209)    $  (11,784,009)
Items reflected in net loss not requiring cash:
  Depreciation and amortization..............................        778,745            708,475
  Write-off of intangibles...................................              -            600,000
  Equity in net loss of joint venture........................        860,370            925,055
  Interest Imputed on convertible debentures.................              -          2,181,666
Changes in operating assets and liabilities..................     (1,822,124)         1,168,114
                                                               -------------     --------------

Net cash used in operating activities........................     (4,915,218)        (6,200,699)

Investing activities
Maturities of short-term investments.........................      3,776,403         (3,936,409)
Purchase of property and equipment...........................              -            (34,264)
Sale of property and equipment...............................              -            338,161
Investment in and advances to joint venture..................              -           (571,999)
Deposits and other...........................................         11,650            146,523
                                                               -------------     --------------

Net cash used in investing activities........................      3,788,053         (4,057,988)

Financing activities
Issuance of common stock.....................................              -                  -
Issuance of preferred stock, net.............................              -         13,972,261
Proceeds from notes payable..................................              -          3,000,000
Proceeds from notes receivable...............................              -             62,000
Increase in current portion of capital leases/notes payables.        213,312           (526,134)
Other........................................................              -                  -
                                                               -------------     --------------

Net cash provided by financing activities....................        213,312         16,508,127
                                                               -------------     --------------

Increase/(Decrease) in cash and cash equivalents.............       (913,853)         6,249,440
Cash and cash equivalents at beginning of period.............      1,202,668            532,013
                                                               -------------     --------------

Cash and cash equivalents at end of period...................  $     288,815     $    6,781,453
                                                               =============     ==============


Supplemental disclosures of cash flow information:
Interest paid................................................  $                 $       27,456
Supplemental schedule of noncash investing and
  financing activities:
Preferred stock dividends accrued............................              -          1,690,501
Common stock issued in payment of dividends on preferred stock             -             17,192
Common stock issued upon conversion of convertible debentures
  and accrued interest.......................................              -            358,559
Preferred stock issued upon conversion of short term notes payable         -            650,000
Preferred stock issued for receivable........................              -          4,154,007

</TABLE>


                                   (See Accompanying Notes)

                                           - 5 -




<PAGE>

                               Genta Incorporated
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                                   (Unaudited)


(1)     Basis of Presentation

        The unaudited  condensed  consolidated  financial  statements  have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,  they
do not include all of the information and footnotes required to be presented for
complete financial statements. The accompanying financial statements reflect all
adjustments  (consisting  only of normal  recurring  accruals) which are, in the
opinion of management,  necessary for a fair presentation of the results for the
interim periods  presented.  Certain balances in 1997 have been  reclassified to
conform with the presentation in 1998.

        The condensed  consolidated financial statements and related disclosures
have been  prepared  with the  presumption  that users of the interim  financial
information have read or have access to the audited financial statements for the
preceding fiscal year. Accordingly, these financial statements should be read in
conjunction with the audited  consolidated  financial statements and the related
notes thereto  included in the  Registrant's  Annual Report on Form 10-K for the
year ended December 31, 1997, as amended.

        The  Company  has  experienced  significant  quarterly  fluctuations  in
operating results and it expects that these  fluctuations in revenues,  expenses
and losses will continue.

(2)     Inventories

        Inventories are comprised of the following:

<TABLE>
<CAPTION>

                                         December 31, 1997      September 30, 1998
                                       --------------------    --------------------
<S>                                <C>                      <C>    

Raw materials and supplies             $            385,517    $            329,681

Work-in-process                                     311,440                 141,120

Finished goods                                      261,849                 355,197

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


                                       $            958,806    $            826,008
                                       ====================    ====================

</TABLE>


(3)     Net Loss Per Common Share

        As required, the Company adopted SFAS No. 128, "Earnings Per Share," for
the year ended  December  31,  1997.  SFAS No. 128  changes  the method  used to
calculate  earnings per share and requires the restatement of all prior periods.
Under SFAS No.  128,  the  Company is  required  to  present  basic and  diluted
earnings  per  share if  applicable.  Basic  earnings  per share is based on the
weighted  average  number of  shares  outstanding  during  the  period.  Diluted
earnings per share includes the weighted  average  number of shares  outstanding
and gives effect to potentially dilutive common shares such as options, warrants
and convertible debt and preferred stock outstanding.

        Net loss per common share for the nine months ended  September  30, 1998
and 1997 is based on the  weighted  average  number of  shares  of common  stock
outstanding during the periods. Potentially dilutive securities include options,
warrants and convertible preferred stock; however, such securities have not been
included in the  calculation of the net loss per common share as their effect is
antidilutive where, as here, there is loss rather than


                                      - 6 -




<PAGE>

earnings.  Therefore,  there is no difference  between the basic and diluted net
loss per common share for any of the periods presented.

(4)     Stockholders' Equity

During the third  quarter of 1998,  an  aggregate  of 23,710  shares of Series D
Preferred  Stock were converted at the option of the respective  holders thereof
into an aggregate of  2,512,312  shares of Genta's  common stock at a conversion
price of  $0.94375  per  share.  From the  close of the  third  quarter  through
November 10, 1998 an aggregate of 2,000 shares of Series A Preferred  Stock were
converted at the option of the holders of the shares into an aggregate of 14,510
shares of Genta's  common stock at a conversion  price of $8.27 per share and an
aggregate  of 9,400  shares of Series D Preferred  Stock were  converted  at the
option of the holders of the shares into an aggregate  of 996,024  shares of the
Company's common stock at a conversion price of $0.94375 per share.

(5)     Legal Proceedings

        LBC Capital Resources, Inc. ("LBC"), a Philadelphia-based broker/dealer,
has asserted claims against the Company and others,  including Paramount Capital
Inc., of which Dr.  Rosenwald is the sole  stockholder and Mr. Weiss is a Senior
Managing Director, and various related entities and persons. LBC's claims relate
to the alleged  breach by the Company of certain  letter  agreements,  allegedly
entered  into by LBC and the Company in 1995 and 1996 with  respect to brokerage
and/or investment banking services, particularly in connection with a $3 million
investment  for which LBC is seeking a fee. In April 1998 a Complaint  was filed
in the United States  District  Court for the Southern  District of New York (98
Civ. 2491) by LBC against the Company and the same other parties.
The Company is engaged in settlement discussions with LBC.

        On June 4,  1998,  the  Company's  statutory  process  agent  received a
Summons and Complaint in a lawsuit  brought by Johns Hopkins against the Company
in Maryland Circuit Court for Baltimore City (Case No. 98120110).  Johns Hopkins
alleges  in the  Complaint  that the  Company  has  breached  the Johns  Hopkins
Agreement and owes it licensing  royalty fees and related expenses in the amount
of  $308,832.24.  Johns Hopkins also alleges the  existence of a separate  March
1993 letter agreement wherein the Company agreed to support a fellowship program
at the Johns  Hopkins  School of  Hygiene  and Public  Health and the  Company's
breach thereof,  with damages of $326,829.00.  On August 10, 1998, the Company's
statutory  process agent  received a Summons and Complaint in a related  lawsuit
brought by the  Ts'o/Miller  Partnership  and others  against the Company in the
same court (Case No. 98182113).  The Ts'o/Miller  Partnership  claims that it is
owed  licensing  royalty  fees in the  amount of  $287,671.23.  The  Company  is
currently in settlement negotiations.

On June 30,  1998,  the  Director  General of the  Company's  subsidiary,  Genta
Pharmaceuticals  Europe,  SA ("Genta  Europe"),  was served  notice of a suit in
Marseilles,  France by  Marseilles  Amenagement,  the  manager of the  Company's
facilities in Marseilles.  On July 30, 1998, the Company's  office in San Diego,
California  was also served with notice of the suit.  The suit seeks the payment
of unpaid past rents in the amount of  473,464.50  FF (as of November  12, 1998,
approximately  $83,000),  the removal of the Company  from the  facility  and an
indemnity  payment of  1,852,429  FF (as of  November  12,  1998,  approximately
$326,000),  which is  allegedly  equal to the  balance of the first nine  years'
rent. A hearing is scheduled for December 11, 1998.  On July 1, 1998,  the ANVAR
notified Genta Europe by letter of its claim that the Company remains liable for
4,187,423 FF (as of November 12, 1998,  approximately  $737,000) and is required
to pay this amount immediately.  In view of these events, the Board of Directors
of Genta Europe directed the Director General to declare  "Cessation of Payment"
in the commercial court in France,  which  declaration was made in July 1998. On
August 27,  1998,  the  commercial  court  appointed  a trustee  to replace  the
Director General and to represent Genta Europe in its liquidation process.


                                      - 7 -

<PAGE>

        In October 1996,  JBL retained a chemical  consulting  firm to advise it
with respect to an incident of soil and groundwater contamination (the "Spill").
Sampling  conducted at the JBL facility  revealed the presence of chloroform and
perchloroethylenes  ("PCEs") in the soil and  groundwater at this site. Six soil
borings were drilled and groundwater  wells were installed at several  locations
around  the site.  Chloroform  was  detected  at  levels  of up to 190  ug/liter
on-site, exceeding the California Drinking Water Maximum Contamination Level for
trihalomethanes  of 100 ug/liter.  PCEs were also detected at levels of up to 22
ug/liter on-site,  exceeding the California Drinking Water Maximum Contamination
Level of 5 ug/liter.  In  addition,  toluene  was  detected at levels of up to 2
ug/liter at several points on-site,  which is significantly below the California
Toxicity Action Level of 100 ug/liter. These toxicity levels are not binding, as
the final regulatory maximum levels may be higher or lower. JBL has notified the
appropriate  regulatory  agency,  the California  Regional Water Quality Control
Board,  of  conditions  at the  site,  and with the  agency's  approval,  JBL is
monitoring  groundwater  conditions  at the site on a  quarterly  basis.  JBL is
currently in the  pre-regulatory  action stage with ongoing site  monitoring and
site   assessment.   In  addition,   current   sampling  results  indicate  that
contaminants may be migrating off-site. An off-site well, used as a domestic and
irrigation  water source,  has shown evidence of being impacted by chloroform at
1.0  ug/liter,   significantly  below  the  California  Drinking  Water  Maximum
Contamination  Level for  trihalomethanes  of 100  ug/liter,  and toluene at 0.9
ug/liter,  also  significantly  below (less than one percent of) the  California
Toxicity  Action Level of 100  ug/liter.  While  another  off-site well has been
found to contain  chloroform,  the  engineering  consultant  concluded  that the
contaminants  do not appear to relate to impact  from the JBL site.  The Company
believes that any costs  associated  with further  investigating  or remediating
this  contamination  will not have a material  adverse effect on the business of
the Company,  although there can be no assurance thereof. 

           JBL  received  notice  on  October  16,  1998  from  Region IX of the
Environmental  Protection  Agency (the "EPA") that it had been  identified  as a
potentially  responsible  party ("PRP") at the Casmalia  Disposal Site, which is
located in Santa Barbara,  California.  JBL has been  designated as a de minimis
PRP by the  EPA.  The EPA  currently  estimates  that de  minimis  PRPs  will be
required to pay as little as $75,000  and as much as  $750,000  to settle  their
potential liability, depending upon the volume of wastes attributed to them. The
EPA  plans on  sending  by the  beginning  of  January  1999  individual  volume
calculations  to each de minimis PRP that  received  the  aforementioned  notice
letter. While the terms of a settlement have not been discussed,  any settlement
with de minimis PRPs should contain standard  contribution  protection language.
JBL is investigating all factual and legal defenses that are available to it and
plans on responding to this matter accordingly.

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

Overview

        Since its  inception  in  February  1988,  the  Company  has devoted its
principal efforts toward drug discovery,  research and development.  The Company
has been  unprofitable to date and, even if it obtains financing to continue its
operations,  expects to incur substantial  operating losses for the next several
years  due to  continued  requirements  for  ongoing  research  and  development
activities,   preclinical  and  clinical  testing,   manufacturing   activities,
regulatory activities,  establishment of a sales and marketing organization, and
development  activities  undertaken by Genta Jago,  the Company's  joint venture
with Jagotec.  From the period since its  inception to September  30, 1998,  the
Company has incurred a cumulative  net loss of $129.2  million.  The Company has
experienced  significant  quarterly  fluctuations  in  operating  results and it
expects that these fluctuations in revenues, expenses and losses will continue.

        The  Company's   independent   auditors  have  included  an  explanatory
statement in their report to the Company's financial  statements at December 31,
1997, that expresses  substantial  doubt as to the Company's ability to continue
as a going concern.  There are several factors that must be considered  risks in
that  regard  and those that are known to  management  are  discussed  under the
caption "Certain Trends and  Uncertainties--Need  for Additional  Funds; Risk of
Insolvency" in this Management's  Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A").



                                      - 8 -

<PAGE>

        The statements  contained in this Quarterly Report on Form 10-Q that are
not historical are forward-looking  statements within the meaning of Section 27A
of the  Securities  Act of 1933, as amended,  and Section 21E of the  Securities
Exchange  Act  of  1934,  as  amended,   including   statements   regarding  the
expectations,  beliefs,  intentions  or  strategies  regarding  the future.  The
Company  intends  that  all   forward-looking   statements  be  subject  to  the
safe-harbor  provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect the Company's views as of the date they
are made with  respect  to future  events  and  financial  performance,  but are
subject to many risks and uncertainties, which could cause the actual results of
the Company to differ materially from any future results expressed or implied by
such  forward-looking  statements.  Examples  of such  risks  and  uncertainties
include,  but are not limited to, obtaining sufficient financing to maintain the
Company's  planned  operations,  the timely  development,  receipt of  necessary
regulatory approvals and acceptance of new products,  the successful application
of  the  Company's  technology  to  produce  new  products,   the  obtaining  of
proprietary  protection  for any such  technology  and  products,  the impact of
competitive  products and pricing and  reimbursement  policies,  changing market
conditions and the other risks detailed in the Certain Trends and  Uncertainties
section of this MD&A and elsewhere in this  Quarterly  Report on Form 10-Q.  The
Company does not undertake to update any forward-looking statements.

Results of Operations

         Operating  revenues  totaled $1.5 million in the third  quarter of 1998
compared to $1.3  million in the third  quarter of 1997 and $4.2 million for the
nine months ended  September 30, 1998 compared to $3.7 million in the comparable
period of 1997. The increase in revenue is the result of an increase in sales by
the Company's  subsidiary,  JBL  Scientific,  Inc. All of the Company's  product
sales are  attributable to JBL. Sales of specialty  chemical and  pharmaceutical
intermediate products used in the clinical diagnostics,  pharmaceutical research
and development and pharmaceutical  manufacturing were $1.5 million in the third
quarter of 1998  compared  to $1.2  million in the same  period in 1997 and $4.1
million for the nine months ended September 30, 1998 compared to $3.5 million in
the  comparable  period  of 1997.  While  the  annual  demand  for many of JBL's
products  is  relatively  stable,   there  are  significant   quarter-to-quarter
variations  in sales due to the timing of  customers'  production  schedules and
demands.  Overall, demand for the Company's products has been increasing,  while
competition   has  caused  prices  to  decrease.   Sales  of  products  used  in
pharmaceutical  manufacturing  have  trended  downward  in 1998  while  sales of
products  used  in   pharmaceutical   research  and   development  and  clinical
diagnostics increased due to increased market penetration.

        Europa Bioproducts ("Europa"), JBL's European distributor, accounted for
approximately  18% of product  sales in the third  quarter of 1998,  compared to
14.5% in the comparable  period in 1998. Two other  customers each accounted for
more than 10% of product  sales in the third quarter of 1998,  representing  19%
and 13%.  Individual  customers' demands for JBL products  generally  fluctuates
with  the  outcomes  of  clinical  trials,   the  availability  of  funding  and
manufacturing  schedules.  The Company  believes  that the loss of any  material
customer, if not replaced, could have an adverse effect on the Company.

         Costs and expenses were $2.5 million in the third quarter of 1998, down
from $5.0  million for the same  quarter in 1997,  and $8.3 million for the nine
months ended  September  30, 1998  compared to $12.4  million in the  comparable
period in 1997.  The costs of products sold by JBL decreased to $0.73 million in
the third  quarter of 1998 from $0.83  million in the third  quarter of 1997 and
were $2.34  million for both the nine months  ended  September  30, 1998 and the
comparable  period of 1997.  Gross  margins for JBL in the third quarter of 1998
were $0.74  million  compared to $0.37  million in the third quarter of 1997 and
$1.76  million for the nine months ended  September  30, 1998  compared to $1.12
million in the  comparable  period of 1997.  The  improvement  in gross  margins
largely  reflects  the  increased  level of sales and  relatively  stable  fixed
overhead costs.

        Research and  Development  expenses  decreased in the third quarter from
$2.24  million in 1997 to $0.35  million in 1998,  and in the nine months  ended
September 30 from $4.48  million in 1997 to $1.79  million in 1998.  Included in
these  expenses is $0.63  million in the third quarter of 1997 and $0.79 million
in the  first  half of 1998  for the  purchase  of bulk  G3139  to  support  the
Company's expanded clinical research program. The decreases also were the result
of a non-recurring charge of $0.60 million recorded in the third quarter of 1997
related to  management's  decision to abandon  certain  patents that  management
determined  were no longer  germane to the Company's  mainstream  business.  The
remaining  decrease in on-going  research and development  expenses is primarily
attributable  to the Company's  research and  development  workforce  reductions
implemented in 1997 together with the discontinuation of several programs.

        Selling,  General and  Administrative  Expenses were $1.4 million in the
third quarter of 1998 compared to $1.96 million in the third quarter of 1997 and
$4.2  million for the nine months  ended  September  30, 1998  compared to $5.54
million in the comparable  period of 1997. The reduction is  attributable to the
Company's  restructuring,  workforce  reductions  and  the  decrease  of  leased
facilities.



                                      - 9 -

<PAGE>

         The  Company's  net loss  totaled  $1.18  million,  or $0.15 per common
share, for the third quarter of 1998 compared to a net loss of $5.09 million, or
$1.14 per common share, for the third quarter of 1997. For the first nine months
of 1998, the Company's net loss was $4.73 million,  or 0.59 per share,  compared
to a net loss of $29.42  million for the first nine months of 1997, or $6.92 per
share.  The  Company's net losses for the third quarter and first nine months of
1998 were lower than those reported for the comparable periods of 1997 primarily
as a result of the following  which occurred in 1997: a one-time charge of $16.2
million of imputed  dividends due to the value  associated  with the  discounted
conversion  terms and  liquidation  preference of the Series D Preferred  Stock,
$0.54  million  in accrued  dividends  on the Series A  Preferred  Stock,  $0.87
million of accrued severance costs, which were partially offset by $0.75 million
Research  and  Development   cost-savings   related  to  workforce  and  program
reductions  implemented  in 1995  through  1997, a $0.60  million  non-recurring
charge for certain abandoned patents,  the cessation of the obligation to accrue
dividends on the Series A Preferred Stock as of October 1, 1997 ($1.7 million in
Series A preferred  dividends were accrued in 1997) and $2.2 million in interest
expense in the first nine months of 1997 from the  amortization of debt issuance
costs of Bridge Warrants issued in the first quarter of 1997.

        The Company's equity in net loss of joint venture (Genta Jago) increased
to $0.29  million  in the  third  quarter  of 1998  from  $0.14  million  in the
comparable  period of 1997,  and  decreased to $0.86 million for the nine months
ended  September 30, 1998 compared to $0.93 million in the comparable  period of
1997.  The  decrease  in the  Company's  equity in net loss of joint  venture is
largely  attributable  to  the  fact  that  a  greater  portion  of  development
activities  were funded pursuant to Genta Jago's  collaborative  agreements with
third parties. The equity in net loss of joint venture is determined by reducing
the loss per Genta Jago's financials by Genta's 20% markup on internal costs for
which the joint  venture is billed  plus the  interest  accrued  on the  working
capital loans. Interim financial  information regarding Genta Jago will be filed
by amendment when available.

        Since the formation of Genta Jago,  no products  have been  successfully
developed and marketed. Since the initial plans called for earlier introductions
and since there have been significant  changes in the market  environment  since
the Company entered into the joint venture,  there is reason to believe that any
products that may be marketed in the future could represent significantly poorer
financial  opportunities  than those that were anticipated in the earlier plans.
This  reduction  in  opportunity  derives  from  factors such as the presence of
direct  competitors  to Genta Jago's  products being in the  marketplace  before
Genta Jago, and increasing  pricing pressures on  pharmaceuticals,  particularly
multisource or generic products,  from payors such as reimbursers and government
buyers.  On May 20, 1998,  Genta Jago received  notice from  Apothecon that they
have  terminated  the agreement for the  development  of  ketoprofen.  Apothecon
stated that their  decision to terminate was based on the facts that a competing
generic is already being successfully  marketed,  other competitors already have
ANDAs pending for their own generic  formulations of such drug and they consider
the  GEOMATRIX(R)  capsule  size  competitively  disadvantageous.  Both of these
factors may  adversely  affect Genta Jago even if it is successful in developing
products to obtain regulatory approval.  As a result and in consideration of the
Company's need to reduce expenses and focus its efforts,  the Company is seeking
to direct its  resources  away from the joint venture to its  Anticode(TM)  drug
development,  specifically  G3139, for the immediate  future.  On July 27, 1998,
SkyePharma  PLC,  the  parent  company  to  SkyPharma  ("Jago"  was  changed  to
"SkyePharma" on May 1, 1998) announced that an ANDA for naproxen sodium filed by
Brightstone Pharma, its U.S. sales and marketing  subsidiary,  had been accepted
for filing by the FDA. See  "Certain  Trends and  Uncertainties--Uncertainty  of
Technological    Change   and    Competition"    and    "Certain    Trends   and
Uncertainties--Potential  Adverse Effect of Product Pricing,  Reimbursement  and
Related Matters."

        Interest   income  has  fluctuated   significantly   each  year  and  is
anticipated  to continue to fluctuate  primarily due to changes in the levels of
cash, investments and interest rates each period.

        In  consideration  of EITF  D-60,  which was  issued by the SEC in March
1997, the Company  recorded debt issuance costs totaling $3.0 million related to
value  associated  with 6.4 million Bridge  Warrants issued in connection with a
$3.0 million  debt issue in February  1997 that  matured in December  1997.  The
Company has amortized such costs to interest  expense over the life of the debt.
In the three months ended  September 30, 1997, the Company  recorded a charge to
interest expense  totaling  $818,333 ($.10 per share) related to amortization of
such debt issuance costs.



                                     - 10 -

<PAGE>

Liquidity and Capital Resources

        Since inception,  the Company has financed its operations primarily from
private and public offerings of its equity securities.  Cash provided from these
offerings  totaled  approximately  $124.2 million through September 30, 1998. At
September  30,  1998,  the Company had cash,  cash  equivalents  and  short-term
investments totaling $3.8 million compared to $8.5 million at December 31, 1997.

        The Company will need substantial  additional funds and may consider the
divestiture of non-strategic  assets.  The Company projects that, at its current
rate of spending and for its current  activities,  its existing  cash funds will
enable the Company to maintain its present  operations into the first quarter of
1999.  To the  extent  that  the  Company  is  successful  in  accelerating  its
development  of G3139,  in expanding its  development  portfolio or acquiring or
adding new development  candidates,  the current cash resources will be consumed
at a greater rate. Similarly,  the Company has been seeking to identify and hire
additional senior managers to direct the business of the Company.  To the extent
it is  successful in these  endeavors,  the rate of cash  utilization  will also
increase.  Certain  parties  with whom the Company has  agreements  have claimed
default  and,  should the Company be obligated to pay these claims or should the
Company be obligated to incur  significant legal fees to defend or negotiate its
positions or both,  its ability to continue  operations  could be  significantly
reduced or shortened.  See "MD&A--Certain  Trends and  Uncertainties--Claims  of
Genta's  Default  Under  Various   Agreements."  The  Company  anticipates  that
significant additional sources of financing,  including equity financings,  will
be  required  in  order  for the  Company  to  continue  its  planned  principal
operations.  The Company also anticipates seeking additional product development
opportunities from external sources. Such acquisitions may consume cash reserves
or  require  additional  cash or  equity.  The  Company's  working  capital  and
additional  funding  requirements will depend upon numerous factors,  including:
(i) the progress of the Company's  research and development  programs;  (ii) the
timing and results of preclinical  testing and clinical trials;  (iii) the level
of resources devoted to Genta Jago; (iv) the level of resources that the Company
devotes to sales and marketing  capabilities;  (v) technological  advances; (vi)
the activities of competitors; and (vii) the ability of the Company to establish
and maintain collaborative arrangements with others to fund certain research and
development  efforts, to conduct clinical trials, to obtain regulatory approvals
and, if such approvals are obtained,  to manufacture  and market  products.  See
"MD&A--Certain  Trends and  Uncertainties--Need  for Additional  Funds;  Risk of
Insolvency."

        If the Company  successfully  secures sufficient levels of collaborative
revenues and other  sources of  financing,  it expects to use such  financing to
continue and expand its ongoing research and development activities, preclinical
testing and clinical trials, manufacturing activities, costs associated with the
market  introduction of potential  products and expansion of its  administrative
activities.

         In the third  quarter of 1998,  the holders of an  aggregate  of 23,710
shares of Series D Preferred Stock converted those shares into 2,512,312  shares
of Common Stock.  From the close of the third quarter through November 10, 1998,
an aggregate of 9,400 shares of Series D Preferred Stock were converted by their
respective  holders  into  an  aggregate  of  996,024  shares  of  Common  Stock
(approximately  10.7% of the  outstanding  Common Stock) and an aggregate  2,000
shares of Series A Preferred  Stock were converted by their  respective  holders
into an aggregate of 14,510 shares of common stock.

Impact of Year 2000

        Some older  computer  programs were written using two digits rather than
four to define the applicable  year. As a result,  those computer  programs have
sensitive  software that recognizes a date using 00 as the year 1900 rather than
the year 2000 (the "Year 2000  Issue").  This  could  cause a system  failure or
miscalculations   causing  disruption  of  operations,   including  a  temporary
inability  to  process   transactions  or  engage  in  similar  normal  business
activities.

        The  Company has  completed  its  assessment  of whether it will have to
modify or replace  portions of its  software so that its  computer  systems will
function  properly  with respect to dates in the year 2000 and  thereafter.  The
Company is  currently  implementing  a plan to acquire and install new  computer
hardware and upgraded  software in its facilities that will  accommodate  dating
beyond 1999. The total year 2000 project cost is not expected to be material and
is expected to be completed  not later than October 31, 1999,  which is prior to
any anticipated impact on its operating systems.  The Company believes that with
the  modifications to existing software and conversions to new software the Year
2000 Issue  will not pose  significant  operational  problems  for its  computer
systems. However, if such modifications and conversions are not made, or are not
completed  timely,  the Year 2000 Issue could have a material  adverse effect on
the operations of the Company.


                                     - 11 -

<PAGE>

        The  Company  has  initiated  formal  communications  with  all  of  its
significant  suppliers to determine the extent to which the Company's  interface
systems are  vulnerable to those third parties'  failure to remediate  their own
Year 2000 Issues. If through such communication or otherwise the Company becomes
aware of any such  failures and is not satisfied  that those  failures are being
adequately  addressed,  it will  take  appropriate  steps  to  find  alternative
suppliers.  There is no assurance  that the systems of other  companies on which
the Company's systems rely will be timely converted and will not have a material
adverse effect on the Company's  systems.  The costs of the project and the date
on which the Company believes it will complete the Year 2000  modifications  are
based  on  management's  best  estimates,  which  were  derived  using  numerous
assumptions of future events,  including the continued  availability  of certain
resources and factors.  However,  there can be no assurance that these estimates
will  be  achieved  and  actual  results  could  differ  materially  from  those
anticipated.  Specific  factors  that  might  cause  such  material  differences
include,  but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.  

        It has been  acknowledged  by  governmental  authorities  that year 2000
problems have the  potential to disrupt  global  economies,  that no business is
immune from the potentially far-reaching effects of year 2000 problems, and that
it is difficult to predict with  certainty  what will happen after  December 31,
1999. Consequently,  it is possible that year 2000 problems will have a material
effect on the  Company's  business  even if the  Company  takes all  appropriate
measures to ensure that it and its key suppliers are year 2000 compliant.

Certain Trends and Uncertainties

        In addition to the other information  contained in this Quarterly Report
on Form 10-Q, the following factors should be considered carefully.

Need for Additional Funds; Risk of Insolvency.

        Genta's  operations to date have consumed  substantial  amounts of cash.
The Company  will need to raise  substantial  additional  funds to continue  its
operations and to conduct the costly and  time-consuming  research,  preclinical
development and clinical trials necessary to bring its products to market and to
establish  production and marketing  capabilities.  The Company  intends to seek
additional  funding  through  public or  private  financings,  including  equity
financings,  and through  collaborative  arrangements.  Adequate funds for these
purposes,  whether obtained through  financial markets or collaborative or other
arrangements with corporate partners or from other sources, may not be available
when  needed  or on terms  acceptable  to the  Company.  Insufficient  funds may
require  the  Company  to  delay,  scale  back or  eliminate  some or all of its
research  and  product  development   programs,  to  license  third  parties  to
commercialize  products or technologies that the Company would otherwise seek to
develop  itself,  to sell itself to a third party,  to cease  operations,  or to
declare  bankruptcy.  The Company's future cash requirements will be affected by
results of  research  and  development,  results  of  pre-clinical  studies  and
bioequivalence and clinical trials,  relationships with corporate collaborators,
changes in the focus and  direction of the  Company's  research and  development
programs,  competitive and  technological  advances,  resources devoted to Genta
Jago,  the  FDA  and  foreign  regulatory  processes,  potential  litigation  by
companies  seeking  to  prevent  or delay  marketing  approval  of Genta  Jago's
products and other factors.

Loss History; Uncertainty of Future Profitability.

         Genta has been unprofitable to date,  incurring  substantial  operating
losses associated with ongoing research and development activities, pre-clinical
testing,  clinical trials,  manufacturing  activities and development activities
undertaken  by Genta Jago.  From the period since its inception to September 30,
1998,  the Company has incurred a  cumulative  net loss of $129.2  million.  The
Company has experienced  significant quarterly fluctuations in operating results
and  expects  that these  fluctuations  in  revenues,  expenses  and losses will
continue.  Ernst & Young LLP ("E&Y") has  included an  explanatory  paragraph in
their report to the Company's  financial  statements at December 31, 1997, which
paragraph expresses substantial doubt as to the Company's ability to continue as
a going concern. See "Report of Ernst & Young LLP, Independent  Auditors" in the
1997  Annual  Report  and  "MD&A--Certain  Trends  and  Uncertainties--Need  for
Additional  Funds;  Risk of  Insolvency."  As reported in the Company's  Current
Report  on Form 8-K  dated as of  October  28,  1998,  E&Y has  resigned  as the
Company's independent accountants.


                                     - 12 -

<PAGE>

Subordination of Common Stock to Series A and Series D Preferred Stock;  Risk of
Dilution; Anti-Dilution Adjustments.

         In the  event of the  liquidation,  dissolution  or  winding  up of the
Company,  the Common Stock is expressly  subordinate to the approximately  $26.9
million preference of the 449,100 outstanding shares of Series A Preferred Stock
and the  approximately  $32.8 million  preference of 234,280  shares of Series D
Preferred  Stock  (including  40,395 shares of Series D Preferred Stock issuable
upon  exercise  of certain  warrants).  Dividends  may not be paid on the Common
Stock  unless full  cumulative  dividends on the Series A and Series D Preferred
Stocks have been paid or funds have been set aside for such preferred  dividends
by the Company.

         The  conversion  rate of the  Series A  Preferred  Stock is  subject to
adjustment,  among other  things,  upon  certain  issuances  of Common  Stock or
securities  convertible  into  Common  Stock at $67.50 per share or less.  As of
September 30, 1998, each share of Series A Preferred  Stock is convertible  into
approximately  7.255 shares of Common  Stock at a conversion  price of $8.27 per
share.  The Series A Warrants  to  purchase an  aggregate  of 675,966  shares of
Common Stock expired on September 24, 1998. The conversion  rate of the Series D
Preferred  Stock and the exercise  prices of the Class D Warrants are subject to
adjustment,  among other  things,  upon  certain  issuances  of Common  Stock or
securities  convertible  into  Common  Stock at prices per share  below  certain
levels.  In addition,  the Conversion  Price of the Series D Preferred  Stock in
effect on  January  29,  1999 (the  "Reset  Date")  will be  adjusted  and reset
effective  as of the Reset Date if the  average  closing bid price of the Common
Stock for the 20 consecutive  trading days immediately  preceding the Reset Date
(the  "19-Month  Trading  Price")  is  less  than  140%  of the  then-applicable
Conversion  Price (a "Reset Event").  Upon the occurrence of a Reset Event,  the
then-applicable  Conversion  Price will be reduced to be equal to the greater of
(i)  the  19-Month   Trading   Price  divided  by  1.40  and  (ii)  25%  of  the
then-applicable  Conversion  Price.  Each share of Series D  Preferred  Stock is
presently  convertible  into  approximately  106  shares of Common  Stock,  at a
conversion  price of $0.94375 per share of Common Stock,  and the exercise price
of the Class D Warrants is presently $0.94375 per share. There are 807,900 Class
D Warrants  outstanding and another  201,975 Class D Warrants  issuable upon the
exercise  of certain  warrants.  Finally,  the Company  has  outstanding  Bridge
Warrants to purchase an  aggregate  of  6,357,616  shares of Common  Stock at an
exercise  price of $0.471875 per share,  Line of Credit  Warrants to purchase an
aggregate  of 50,000  shares of Common  Stock at an exercise  price of $2.50 per
share,  warrants to purchase an  aggregate  of 95,768  shares of Common Stock at
various  exercise  prices  between  approximately  $13  and $21  per  share  and
outstanding  employee stock  options.  The Note and Warrant  Purchase  Agreement
provides that a number of additional Bridge Warrants ("Penalty  Warrants") equal
to 1.5% of the number of Bridge  Warrants  then held by the Aries Funds shall be
issued to the Aries Funds for each day beyond 30 days after the final closing of
the Private Placement that a shelf  registration  statement  covering the Common
Stock  underlying  the  securities  purchased  pursuant  to the Note and Warrant
Purchase  Agreement  is not filed  with the SEC and for each day beyond 210 days
after the closing date of the  investment  contemplated  by the Note and Warrant
Purchase  Agreement  that such  shelf  registration  statement  is not  declared
effective by the SEC. The Company filed such shelf  registration  statement with
the SEC on  September 9, 1997;  however,  the Company has to date been unable to
have such shelf  registration  statement  declared  effective  by the SEC.  As a
result,  the Company could be obligated to issue  Penalty  Warrants to the Aries
Funds. The Aries Funds have not, to date,  requested that the Company issue such
Penalty  Warrants.  The  Company and the Aries  Funds are  currently  conducting
negotiations to determine whether, and to what extent,  Penalty Warrants will be
issued.  See  "Market for  Registrant's  Common  Equity and Related  Stockholder
Matters--Recent Sales of Unregistered Securities" in the 1997 Annual Report.

Claims of Genta's Default Under Various Agreements.

        On May 7, 1997  SkyePharma and Jagotec gave Genta Jago formal notices of
its assertion that Genta Jago is in breach of the Restated GEOMATRIX(R) Services
Agreement, the Restated GEOMATRIX(R) Research and


                                     - 13 -

<PAGE>

Development Agreement and the Restated  GEOMATRIX(R) License Agreement,  stating
that should the breach not be cured within the  applicable  cure  period,  Genta
Jago would  reserve the right to terminate the  agreements  in  accordance  with
their  terms.  Each of these  Agreements  provides for a cure period of 30 days,
except that if the default is not capable of being cured  within this period and
the defaulting  party is diligently  undertaking to cure such default as soon as
commercially feasible thereafter under the circumstances, then the non-breaching
party shall have no right to terminate the agreement. In addition, each of these
agreements  contains  a  provision  providing  for the final  resolution  of any
disputes,  claims or  controversies,  whether before or after termination of the
agreement,  by  arbitration  in Paris,  France.  After the  30-day  cure  period
expired, SkyePharma did not take action purporting to terminate these agreements
but did not rescind the notices of default. SkyePharma, Jagotec and Jago Holding
AG also gave  formal  notice of default  under the  Restated  Joint  Venture and
Shareholders  Agreement,  contending  that due to  Genta's  failure  to meet its
funding  obligations  to Genta  Jago,  Genta  Jago was  unable  to  fulfill  its
obligations to SkyePharma.  The amount claimed by SkyePharma to be in default is
approximately  $1.2 million,  of which $200,000 relates to 1997 and $1.0 million
relates to  development  costs and license  fees for 1996.  There is no specific
cure period contained in the Restated Joint Venture and  Shareholders  Agreement
but  rather  a  provision  providing  for  resolution  of  disputes,  claims  or
controversies by arbitration in Paris,  France.  The Company met with SkyePharma
and is attempting to resolve the situation without resort to arbitration.  While
a termination  of these  agreements  may have a material  adverse  effect on the
Company, the Company intends to oppose vigorously SkyePharma's position. Stating
that it was without prejudice to Genta's position,  Genta provided approximately
$129,000 to Genta Jago for the  payment by Genta Jago of all amounts  claimed by
SkyePharma under the Restated  GEOMATRIX(R)  License Agreement and certain other
amounts  owed by Genta Jago to third  parties  (both  included  in  SkyePharma's
notice of default).  On May 15, 1997, Johns Hopkins University ("Johns Hopkins")
sent Genta a letter stating that the license  agreement entered into between the
Company  and Johns  Hopkins  in May 1990 (the  "Johns  Hopkins  Agreement")  was
terminated.  On  November  26,  1997 Drs.  Paul O.P.  Ts'o and Paul  Miller (the
"Ts'o/Miller  Partnership")  sent  Genta a letter  claiming  that  Genta  was in
material breach of the February 1989 license  agreement  between the Company and
the Ts'o/Miller  Partnership  (the  "Ts'o/Miller  Agreement") for failing to pay
royalties  from  1995  through  1997.  By  letter  dated  April  28,  1998,  the
Ts'o/Miller  Partnership advised the Company that it was terminating the license
granted  pursuant to the Ts'o/Miller  Agreement.  On June 4, 1998, the Company's
statutory process agent received a Summons and Complaint in a lawsuit brought by
Johns Hopkins  against the Company in Maryland  Circuit Court for Baltimore City
(Case No. 98120110). Johns Hopkins alleges in the Complaint that the Company has
breached the Johns  Hopkins  Agreement  and owes it  licensing  royalty fees and
related  expenses in the amount of  $308,832.24.  Johns Hopkins also alleges the
existence of a separate March 1993 letter  agreement  wherein the Company agreed
to support a  fellowship  program  at the Johns  Hopkins  School of Hygiene  and
Public Health and the Company's breach thereof, with damages of $326,829.00.  On
August 10, 1998,  the Company's  statutory  process agent received a Summons and
Complaint in a related lawsuit brought by the Ts'o/Miller Partnership and others
against  the  Company in the same court  (Case No.  98182113).  The  Ts'o/Miller
Partnership  claims  that it is owed  licensing  royalty  fees in the  amount of
$287,671.23.   The  Company  is  currently  in  settlement   negotiations.   See
"Business--Anticode(TM)       Brand      of      Antisense       Oligonucleotide
Programs--Oligonucleotide          Collaborative          and          Licensing
Agreements--Ts'o/Miller/Hopkins"  and  "Legal  Proceedings"  in the 1997  Annual
Report.  The French government  agency L'Agence  Nationale de Valorisation de la
Recherche  ("ANVAR")  asserted,  in a letter dated February 13, 1998, that Genta
Europe was not in  compliance  with the ANVAR  Agreement  and that  ANVAR  might
request  the  immediate  repayment  of such  loan.  On July 1,  1998,  the ANVAR
notified Genta Europe of its claim that the Company remains liable for 4,187,423
FF (as of August 11, 1998,  approximately  $701,000) and is required to pay this
amount  immediately.  In July 1998, Genta Europe declared "Cessation of Payment"
in the commercial court in France. See "Legal Proceedings" and  "Business--Genta
Europe" in the 1997  Annual  Report.  LBC Capital  Resources,  Inc.  ("LBC"),  a
Philadelphia-based  broker/dealer,  has asserted  claims against the Company and
others. See "Legal Proceedings."

        There can be no assurance that the Company will not incur material costs
in relation to these terminations and/or assertions of default or liability. See
"MD&A--Liquidity and Capital Resources."


                                     - 14 -

<PAGE>

Early Stage of Development; Technological Uncertainty.

        Genta  is at an  early  stage  of  development.  All  of  the  Company's
potential  therapeutic products are in research or development,  and no revenues
have  been  generated  from  therapeutic  product  sales.  To date,  most of the
Company's  resources  have been  dedicated  to  applying  molecular  biology and
medicinal  chemistry to the research and  development of potential  Anticode(TM)
pharmaceutical products based upon oligonucleotide technology. While the Company
has  demonstrated  the activity of  Anticode(TM)  oligonucleotide  technology in
model  systems in vitro and the activity of antisense  technology in animals and
has  identified  compounds  that the Company  believes are worthy of  additional
testing, only one of these potential Anticode(TM)  oligonucleotide  products has
begun to be tested in humans,  with such testing in its early stages.  There can
be no  assurance  that the novel  approach of  oligonucleotide  technology  will
result in products that will receive necessary regulatory approvals or that will
be successful commercially. Further, results obtained in pre-clinical studies or
early clinical investigations or pilot bioequivalence trials are not necessarily
indicative  of results  that will be  obtained  in  pivotal  human  clinical  or
bioequivalence  trials.  There can be no assurance  that any of the Company's or
Genta Jago's potential products can be successfully developed.  Furthermore, the
Company's  products in research or development may prove to have undesirable and
unintended side effects or other characteristics that may prevent or limit their
commercial  use. There can be no assurance that the Company will be permitted to
undertake  human  clinical  testing  of  the  Company's  products  currently  in
pre-clinical  development,   or,  if  permitted,  that  such  products  will  be
demonstrated to be safe and  efficacious.  The Company is pursuing  research and
development   through   Genta  Jago  of  a  range  of  oral   controlled-release
formulations of currently-available pharmaceuticals.  Many of the products to be
developed  through Genta Jago have not yet been  formulated  using  GEOMATRIX(R)
technology.  On July 27,  1998,  SkyePharma  PLC,  the  parent  company to Jago,
announced that an ANDA for naproxen sodium filed by Brightstone Pharma, its U.S.
sales  and  marketing  subsidiary,  had been  accepted  for  filing  by the FDA.
Brightstone  has a license from Genta Jago to market this product.  There can be
no assurance that any of the Company's or Genta Jago's  products will obtain FDA
or foreign  regulatory  approval for any indication or that an approved compound
would be capable of being produced in commercial  quantities at reasonable costs
and successfully  marketed.  Products,  if any,  resulting from Genta's or Genta
Jago's  research and  development  programs are not expected to be  commercially
available for a number of years.  Certain competitive products have already been
filed  with  and/or  approved  by  the  FDA.  See   "MD&A--Certain   Trends  and
Uncertainties--Potential    Adverse   Effect   of   Technological   Change   and
Competition."

Limited Availability of Net Operating Loss Carryforwards.

        At December  31,  1997,  the Company  has  federal  and  California  net
operating  loss  carryforwards  of  approximately  $71,697,000  and  $15,236,000
respectively.  The  difference  between  the  federal  and  California  tax loss
carryforwards is primarily  attributable to the  capitalization  of research and
development   expenses  for  California  tax  purposes  and  the  fifty  percent
limitation on California loss carryforwards  prior to 1997. The federal tax loss
carryforwards   will  begin  expiring  in  2003,  unless  previously   utilized.
Approximately  $2,767,000 of the California tax loss carryforward expired during
1997 and the related deferred tax asset and tax loss  carryforward  amounts have
been reduced  accordingly.  The remaining  California  tax loss will continue to
expire in 1998,  unless  utilized.  The Company also has federal and  California
research and development tax credit  carryforwards of $2,921,000 and $1,203,000,
respectively, which will begin expiring in 2003 unless previously utilized.

        Federal and California tax laws limit the  utilization of income tax net
operating loss and credit  carryforwards  that arise prior to certain cumulative
changes  in a  corporation's  ownership  resulting  in change of  control of the
Company.  The future annual use of net operating loss carryforwards and research
and  development  tax credits will be limited due to the ownership  changes that
occurred  during 1990,  1991,  1993,  1996 and 1997.  Because of the decrease in
value of the Company's stock,  the ownership  changes which occurred in 1996 and
1997 will have a material  limitation on the Company's  ability to utilize these
carryforwards.


                                     - 15 -

<PAGE>

Dividends.

        The Company has never paid cash  dividends  on its Common Stock and does
not anticipate paying any such dividends in the foreseeable future. In addition,
the Company is restricted  from paying cash  dividends on its Common Stock until
such time as all cumulative  dividends  have been paid on outstanding  shares of
its Series A and Series D Preferred  Stocks.  The Company  currently  intends to
retain its earnings, if any, after payment of dividends on outstanding shares of
Series A and Series D Preferred Stocks, for the development of its business.

No Assurance of Regulatory Approval; Government Regulation.

        The FDA and comparable  agencies in foreign countries impose substantial
premarket approval  requirements on the introduction of pharmaceutical  products
through lengthy and detailed  pre-clinical and clinical  testing  procedures and
other costly and time-consuming procedures.  Satisfaction of these requirements,
which  includes  demonstrating  to the  satisfaction  of  the  FDA  and  foreign
regulatory agencies that the product is both safe and effective, typically takes
several years or more  depending  upon the type,  complexity  and novelty of the
product. There can be no assurance that such testing will show any product to be
safe or efficacious or, in the case of certain of Genta Jago's  products,  to be
bioequivalent to a currently-marketed pharmaceutical. Government regulation also
affects the manufacture and marketing of pharmaceutical  products. The effect of
government  regulation  may be to  delay  marketing  of any new  products  for a
considerable or indefinite  period of time, to impose costly procedures upon the
Company's or Genta Jago's  activities and to diminish any competitive  advantage
that the  Company or Genta  Jago may have  attained.  It may take  years  before
marketing approvals are obtained for the Company's or Genta Jago's products,  if
at all. There can be no assurance that FDA or other regulatory  approval for any
products  developed  by the  Company  or Genta  Jago will be granted on a timely
basis, if at all, or, if granted, that such approval will cover all the clinical
indications for which the Company or Genta Jago is seeking  approval or will not
sustain  significant  limitations  in  the  form  of  warnings,  precautions  or
contraindications  with respect to conditions of use.  Further,  with respect to
the reformulated versions of currently-available pharmaceuticals being developed
through  Genta  Jago,  there is a  substantial  risk that the  manufacturers  or
marketers  of such  currently-available  pharmaceuticals  will  seek to delay or
block regulatory approval of any reformulated  versions of such  pharmaceuticals
through  litigation  or other means.  Any  significant  delay in  obtaining,  or
failure  to  obtain,  such  approvals  could  materially  adversely  affect  the
Company's or Genta Jago's revenue.  Moreover,  additional  government regulation
from future legislation or administrative  action may be established which could
prevent or delay  regulatory  approval of the Company's or Genta Jago's products
or further  regulate the prices at which the Company's or Genta Jago's  proposed
products may be sold.

        The Company is also subject to various foreign, federal, state and local
laws, regulations and recommendations  (collectively "Governmental Regulations")
relating to safe working conditions, laboratory and manufacturing practices, the
experimental  use of animals and the use,  manufacture,  storage,  handling  and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious  disease agents,  used in connection with the Company's
research and development work and manufacturing  processes. In October 1996, JBL
retained a chemical  consulting firm to advise it with respect to an incident of
soil and groundwater contamination.  


                                     - 16 -

<PAGE>

In  addition,  JBL  received  notice on October  16,  1998 from Region IX of the
Environmental  Protection  Agency (the "EPA") that it had been  identified  as a
potentially  responsible  party ("PRP") at the Casmalia  Disposal Site, which is
located in Santa  Barbara,  California.  See "Legal  Proceedings."  The  Company
believes  that  it is in  material  compliance  with  Governmental  Regulations,
however,  there can be no  assurance  that the  Company  will not be required to
incur significant costs to comply with Governmental Regulations in the future.

Uncertainty Regarding Patents and Proprietary Technology.

        The  Company's and Genta Jago's  success will depend,  in part, on their
respective  abilities  to obtain  patents,  maintain  trade  secrets and operate
without  infringing the proprietary  rights of others. No assurance can be given
that  patents  issued to or  licensed  by the  Company or Genta Jago will not be
challenged,  invalidated or circumvented,  or that the rights granted thereunder
will provide  competitive  advantages to the Company or Genta Jago. There can be
no assurance  that the  Company's or Genta Jago's  patent  applications  will be
approved,  that the Company or Genta Jago will develop additional  products that
are  patentable,  that any issued  patent will provide the Company or Genta Jago
with any competitive advantage or adequate protection for its inventions or will
not be  challenged  by others,  or that the  patents of others  will not have an
adverse  effect on the  ability of the  Company  or Genta  Jago to do  business.
Competitors  may have filed  applications,  may have been issued  patents or may
obtain  additional  patents  and  proprietary  rights  relating  to  products or
processes  competitive  with those of the  Company or Genta  Jago.  Furthermore,
there can be no assurance  that others will not  independently  develop  similar
products,  duplicate  any of the  Company's or Genta  Jago's  products or design
around any patented products developed by the Company or Genta Jago. The Company
and Genta  Jago rely on  secrecy to protect  technology  in  addition  to patent
protection, especially where patent protection is not believed to be appropriate
or  obtainable.  No  assurance  can be given that others will not  independently
develop  substantially  equivalent  proprietary  information  and  techniques or
otherwise  gain access to the Company's or Genta Jago's trade  secrets,  or that
the Company or Genta Jago can  effectively  protect its rights to its unpatented
trade secrets.

        Genta and Genta Jago have  obtained  licenses or other rights to patents
and other  proprietary  rights of third  parties,  and may be required to obtain
licenses to additional patents or other proprietary rights of third parties.  No
assurance  can be given that any existing  licenses and other rights will remain
in effect or that any licenses  required  under any such  additional  patents or
proprietary rights would be made available on terms acceptable to the Company or
Genta Jago, if at all. If Genta's or Genta Jago's  licenses and other rights are
terminated  or if Genta or Genta Jago cannot  obtain such  additional  licenses,
Genta or Genta Jago could encounter delays in product market introductions while
it attempts to design  around such  patents or could find that the  development,
manufacture or sale of products requiring such licenses could be foreclosed.  In
addition,  the Company or Genta Jago could incur  substantial  costs,  including
costs caused by delays in obtaining regulatory approval and bringing products to
market,


                                     - 17 -

<PAGE>

in  defending  itself in any suits  brought  against  the  Company or Genta Jago
claiming  infringement of the patent rights of third parties or in asserting the
Company's  or Genta  Jago's  patent  rights,  including  those  granted by third
parties,  in a suit against  another  party.  The Company or Genta Jago may also
become involved in interference proceedings declared by the United States Patent
and Trademark Office (or any foreign counterpart) in connection with one or more
of its patents or patent applications, which could result in substantial cost to
the  Company or Genta  Jago,  as well as an adverse  decision  as to priority of
invention  of  the  patent  or  patent  application  involved.  There  can be no
assurance that the Company or Genta Jago will have  sufficient  funds to obtain,
maintain  or enforce  patents on their  respective  products or  technology,  to
obtain  or  maintain  licenses  that may be  required  in order to  develop  and
commercialize  their respective  products,  to contest patents obtained by third
parties, or to defend against suits brought by third parties.

Dependence on Others.

        The  Company's and Genta Jago's  strategy for the research,  development
and commercialization of their products requires negotiating,  entering into and
maintaining  various  arrangements  with  corporate  collaborators,   licensors,
licensees  and others,  and is dependent  upon the  subsequent  success of these
outside parties in performing their responsibilities.  No assurance can be given
that they will obtain such collaborative arrangements on acceptable terms, if at
all, nor can any assurance be given that any current collaborative  arrangements
will be maintained.

Technology Licensed From Third Parties.

        The Company has entered  into  certain  agreements  with,  and  licensed
certain technology and compounds from, third parties.  The Company has relied on
scientific,   technical,  clinical,  commercial  and  other  data  supplied  and
disclosed by others in entering into these agreements,  including the Genta Jago
agreements,  and will rely on such data in  support  of  development  of certain
products.  Although the Company has no reason to believe  that this  information
contains errors of omission or fact, there can be no assurance that there are no
errors of omission or fact that would materially affect the future approvability
or commercial viability of these products.

Potential Adverse Effect of Technological Change and Competition.

        The biotechnology  industry is subject to intense  competition and rapid
and significant  technological  change. The Company and Genta Jago have numerous
competitors  in the  United  States  and other  countries  for their  respective
technologies  and products under  development,  including,  among others,  major
pharmaceutical  and  chemical  companies,   specialized   biotechnology   firms,
universities and other research institutions. There can be no assurance that the
Company's or Genta Jago's competitors will not succeed in developing products or
other novel technologies that are more effective than any which have been or are
being developed by the Company or Genta Jago or which would render the Company's
or Genta Jago's technology and products  non-competitive.  Many of the Company's
and Genta Jago's  competitors have substantially  greater financial,  technical,
marketing and human resources than the Company or Genta Jago. In addition,  many
of those competitors have  significantly  greater experience than the Company or
Genta Jago in undertaking  pre-clinical testing and human clinical trials of new
pharmaceutical  products and  obtaining  FDA and other  regulatory  approvals of
products  for use in  healthcare.  Accordingly,  the  Company's  or Genta Jago's
competitors  may succeed in obtaining  regulatory  approval  for  products  more
rapidly  than the  Company or Genta  Jago and such  competitors  may  succeed in
delaying or blocking  regulatory  approvals  of the  Company's  or Genta  Jago's
products.  As  competitors of the Company or of Genta Jago receive  approval for
products that share the same  potential  market as the Company's or Genta Jago's
potential products, the market share available to the Company or Genta Jago will
likely  be  reduced,  thereby  reducing  the  potential  revenues  and  earnings
available  to  the  Company  or  Genta  Jago.  In  addition,  increased  pricing
competition would also likely result, further reducing the earnings potential of
the  Company's  or Genta  Jago's  products.  The  Company is aware that  certain
competitors  of Genta Jago have  filed,  and  received  approval  of,  ANDAs for
generic formulations of drugs of which Genta Jago was working to develop generic
formulations. Furthermore, if the Company or Genta


                                     - 18 -

<PAGE>

Jago is permitted  to commence  commercial  sales of  products,  it will also be
competing  with  respect  to  marketing  capabilities,  an area in  which it has
limited or no experience,  and manufacturing  efficiency.  There are many public
and private  companies that are conducting  research and development  activities
based on drug delivery or antisense technologies.  The Company believes that the
industry-wide interest in such technologies will accelerate and competition will
intensify as the techniques  which permit drug design and  development  based on
such technologies are more widely understood.

Uncertainty of Clinical Trials and Results.

        The results of clinical trials and  pre-clinical  testing are subject to
varying  interpretations.  Even if the  development  of the  Company's  or Genta
Jago's  respective  products  advances to the  clinical  stage,  there can be no
assurance that such products will prove to be safe and  effective.  The products
that are successfully developed, if any, will be subject to requisite regulatory
approval prior to their  commercial sale, and the approval,  if obtainable,  may
take several years. Generally, only a very small percentage of the number of new
pharmaceutical  products  initially  developed  is  approved  for sale.  Even if
products  are approved  for sale,  there can be no  assurance  that they will be
commercially  successful.  The Company or Genta Jago may encounter unanticipated
problems  relating to development,  manufacturing,  distribution  and marketing,
some of which may be beyond the Company's or Genta Jago's  respective  financial
and technical capacity to solve. The failure to address such problems adequately
could have a material adverse effect on the Company's or Genta Jago's respective
businesses,  financial  conditions,  prospects  and  results of  operations.  No
assurance  can be given  that the  Company  or Genta  Jago will  succeed  in the
development  and  marketing of any new drug  products,  or that they will not be
rendered  obsolete by products of  competitors.  See  "MD&A--Certain  Trends and
Uncertainties--Potential    Adverse   Effect   of   Technological   Change   and
Competition."

Difficult Manufacturing Process; Access to Certain Raw Materials.

        The manufacture of Anticode(TM) oligonucleotides is a time-consuming and
complex process. Management believes that the Company has the ability to acquire
or produce  quantities  of  oligonucleotides  sufficient  to support its present
needs for research and its projected needs for its initial clinical  development
programs.  However, in order to obtain  oligonucleotides  sufficient to meet the
volume and cost  requirements  needed for  certain  commercial  applications  of
Anticode(TM)  oligonucleotide  products,  Genta requires raw materials currently
provided by a single supplier which is itself a development stage  biotechnology
company  (and a  competitor  of the  Company)  and is subject  to  uncertainties
including  the  potential  for  a  decision  by  such  supplier  to  discontinue
production  of such raw  materials,  the  insolvency  of such  supplier,  or the
failure of such supplier to follow applicable  regulatory  guidelines.  Products
based on chemically-modified  oligonucleotides have never been manufactured on a
commercial  scale.  The  manufacture  of all of the  Company's  and Genta Jago's
products  will be subject to current GMP  requirements  prescribed by the FDA or
other standards  prescribed by the appropriate  regulatory agency in the country
of use. There can be no assurance that the Company or Genta Jago will be able to
manufacture  products, or have products manufactured for it, in a timely fashion
at acceptable  quality and prices,  that they or third party  manufacturers  can
comply  with  GMP or that  they or  third  party  manufacturers  will be able to
manufacture an adequate supply of product.  Failure to establish compliance with
GMP to the satisfaction of the FDA can result in delays in, or prohibition from,
initiating clinical trials or commercial marketing of a product.

Limited Sales, Marketing and Distribution Experience.

        The   Company   and  Genta  Jago  have  very   limited   experience   in
pharmaceutical  sales,  marketing and distribution.  In order to market and sell
certain  products  directly,  the Company or Genta Jago would have to develop or
subcontract a sales force and a marketing group with technical expertise.  There
can be no  assurance  that  any  direct  sales  or  marketing  efforts  would be
successful.

Uncertainty of Product Pricing, Reimbursement and Related Matters.

        The  Company's  and Genta Jago's  business may be  materially  adversely
affected by the continuing  efforts of governmental  and  third-party  payers to
contain or reduce the costs of healthcare through various means. For example, in
certain foreign markets the pricing or profitability  of healthcare  products is
subject to government  control.  In the United States,  there have been, and the
Company  expects  that there will  continue to be, a number of federal and state
proposals to implement similar  governmental  control.  While the Company cannot
predict


                                     - 19 -

<PAGE>

whether any such legislative or regulatory proposals or reforms will be adopted,
the  adoption  of any  such  proposal  or  reform  could  adversely  affect  the
commercial  viability of the Company's and Genta Jago's potential  products.  In
addition, in both the United States and elsewhere,  sales of healthcare products
are dependent in part on the  availability of reimbursement to the consumer from
third-party payers, such as government and private insurance plans.  Third-party
payers are increasingly  challenging the prices charged for medical products and
services,  and therefore significant  uncertainty exists as to the reimbursement
of existing and newly-approved healthcare products. If the Company or Genta Jago
succeeds in bringing one or more  products to market,  there can be no assurance
that these products will be considered  cost-effective and that reimbursement to
the consumer  will be available  or will be  sufficient  to allow the Company or
Genta Jago to sell its products on a competitive basis. Finally, given the above
potential  market  constraints  on  pricing,  the  availability  of  competitive
products in these  markets  may further  limit the  Company's  and Genta  Jago's
flexibility in pricing and in obtaining adequate reimbursement for its potential
products. See "MD&A--Certain Trends and Uncertainties--Potential  Adverse Effect
of Technological Change and Competition."

Need for and Dependence on Qualified Personnel.

        The Company's success is highly dependent on the hiring and retention of
key personnel and scientific  staff. The loss of key personnel or the failure to
recruit necessary  additional  personnel or both is likely further to impede the
achievement  of  development  objectives.   There  is  intense  competition  for
qualified personnel in the areas of the Company's  activities,  and there can be
no  assurance  that  Genta will be able to  attract  and  retain  the  qualified
personnel  necessary for the  development of its business.  In October 1998, the
Company hired a Vice President of Corporate  Development  and a Vice  President,
Clinical and Regulatory Affairs, who will join the Company in mid-November.  The
Company is actively engaged in the search for a new Chief Financial Officer.  In
March 1998, the Company's Controller resigned and a replacement is being sought.

Product Liability Exposure; Limited Insurance Coverage.

        The  Company's,  JBL's  and  Genta  Jago's  businesses  expose  them  to
potential   product   liability   risks  that  are   inherent  in  the  testing,
manufacturing,  marketing and sale of human therapeutic  products. If available,
product  liability  insurance  for  the  pharmaceutical  industry  generally  is
expensive. The Company has obtained a level of liability insurance coverage that
it deems appropriate for its current stage of development. However, there can be
no assurance that the Company's  present  insurance  coverage is adequate.  Such
existing coverage may not be adequate as the Company further develops  products,
and no assurance can be given that, in the future,  adequate  insurance coverage
will be  available in  sufficient  amounts or at a  reasonable  cost,  or that a
product liability claim would not have a material adverse effect on the business
or financial condition of the Company.

Fundamental Change.

        The Company's Restated  Certificate of Incorporation  currently provides
that upon the  occurrence  of a  "Fundamental  Change,"  the holders of Series A
Preferred  Stock have the option of requiring the Company to  repurchase  all of
each such holder's shares of Series A Preferred  Stock at the Redemption  Price,
an event that could result in the Company  being  required to pay to the holders
of Series A  Preferred  Stock stock or (in  certain  circumstances)  cash in the
aggregate amount of approximately $26.9 million.  Furthermore, if the Company is
required  to redeem  the  Series A  Preferred  Stock it would  also be  required
(subject to certain  conditions) to offer to redeem the Series D Preferred Stock
on a pari passu basis with the Series A  Preferred  Stock and with the same type
of  consideration  paid in  redemption of the Series A Preferred  Stock;  upon a
Fundamental Change, the Company could, under certain circumstances,  be required
to pay the holders of Series D Preferred  Stock cash in the aggregate  amount of
approximately $27.1 million (not including an additional $5.7 million that could
be payable upon redemption of 40,395 shares of Series D Preferred Stock issuable
upon exercise of certain  warrants).  "Fundamental  Change" is defined as: (i) a
"person" or "Group" (as defined), together with any affiliates, becoming


                                     - 20 -

<PAGE>

the  beneficial  owner (as defined) of Voting Shares (as defined) of the Company
entitled to exercise more than 60% of the total voting power of all  outstanding
Voting  Shares of the  Company  (including  any Voting  Shares that are not then
outstanding  of which  such  person or Group is  deemed  the  beneficial  owner)
(subject to certain exceptions);  (ii) any consolidation of the Company with, or
merger of the Company into, any other person,  any merger of another person into
the Company,  or any sale, lease or transfer of all or substantially  all of the
assets of the Company to another person (subject to certain  exceptions);  (iii)
the sale, transfer or other disposition (or the entry into a commitment to sell,
transfer or otherwise dispose) of all or any portion of the shares of Genta Jago
held at any time by the Company (or the  imposition of any material lien on such
shares which lien is not removed within 30 days of imposition)  and the sale (or
functional  equivalent of a sale) of all or  substantially  all of the assets of
Genta Jago or (iv) the  substantial  reduction or elimination of a public market
for the Common Stock as the result of repurchases,  delisting or  deregistration
of the Common Stock or corporate  reorganization or recapitalization  undertaken
by the Company.

        The SEC Staff is currently  in the process of  reviewing a  registration
statement filed by the Company,  and has raised certain questions  regarding the
Company's  classification  of the  Preferred  Stock as  permanent  (rather  than
"mezzanine")  equity.  Management  of  the  Company  believes,  based  upon  its
Certificate of Incorporation  and the agreement  pursuant to which the Preferred
Stock was issued, and after discussion with Company counsel, that the conditions
for redemption of the Preferred Stock require  volitional acts undertaken by the
Company and are therefore  solely within the control of the Company.  If the SEC
Staff does not accept the Company's position, the Company will file an amendment
to this Form 10-Q  reclassifying the Preferred Stock as "mezzanine"  rather than
permanent equity.

Hazardous Materials; Environmental Matters.

        The  Company's  research and  development  and  manufacturing  processes
involve  the  controlled  storage,  use and  disposal  of  hazardous  materials,
biological hazardous materials and radioactive compounds. The Company is subject
to federal, state and local laws and regulations governing the use, manufacture,
storage,  handling and disposal of such  materials and certain  waste  products.
Although  the Company  believes  that its safety  procedures  for  handling  and
disposing of such  materials  comply with the standards  prescribed by such laws
and  regulations,  the risk of  accidental  contamination  or injury  from these
materials cannot be completely eliminated. In the event of such an accident, the
Company may be held liable for any damages that result,  and any such  liability
could exceed the  resources of the Company.  There can be no assurance  that the
Company  will  not be  required  to  incur  significant  costs  to  comply  with
environmental  laws and  regulations  in the  future,  nor that the  operations,
business or assets of the Company will not be materially  adversely  affected by
current or future environmental laws or regulations. See "Legal Proceedings." 

Volatility of Stock Price; Market Overhang from Outstanding Convertible 
Securities and Warrants.

        The market price of the Company's Common Stock,  like that of the common
stock of many other  biopharmaceutical  companies,  has been highly volatile and
may be so in the future.  Factors  such as, among other  things,  the results of
pre-clinical  studies  and  clinical  trials  by  Genta,  Genta  Jago  or  their
competitors,  other  evidence  of the safety or  efficacy  of products of Genta,
Genta Jago or their competitors,  announcements of technological  innovations or
new  therapeutic  products  by the  Company,  Genta  Jago or their  competitors,
governmental  regulation,  developments in patent or other proprietary rights of
the Company, Genta Jago or their respective  competitors,  including litigation,
fluctuations  in the Company's  operating  results,  and market  conditions  for
biopharmaceutical  stocks in  general  could  have a  significant  impact on the
future  price  of  the  Common  Stock.  At  the  Company's   Annual  Meeting  of
Stockholders  held on April 4, 1997, the  stockholders  approved an amendment to
the Company's  Restated  Certificate  of  Incorporation  effecting a one-for-ten
reverse  stock  split of its Common  Stock.  The  stockholders  also  approved a
reduction of the Company's authorized shares of Common Stock from 150,000,000


                                     - 21 -

<PAGE>

        to 70,000,000.  The Company  commenced  trading on a post-reverse  split
basis at the  commencement of trading on April 7, 1997. As of November 10, 1998,
the  Company  had  9,274,964  shares of Common  Stock  outstanding.  The Company
obtained  stockholder  approval  of  two-for-three,  one-for-two,  two-for-five,
one-for-three, one-for-four, one-for-five, one-for-seven and one-for-ten reverse
stock splits at its annual stockholders'  meeting held on July 14, 1998, and the
Board may, in its  discretion,  effect one of these  reverse stock splits at any
time on or prior to the Company's next annual meeting of stockholders  and would
abandon the remaining alternative reverse stock splits without further action by
the  stockholders  of the Company.  On October 22, 1998, the NASDAQ advised that
the Company's  shares of common stock had not  maintained a minimum  closing bid
price of $1.00.  The NASDAQ stated that no delisting  action with respect to the
bid price deficiency would be initiated at the time of the letter.  Rather,  the
Company was provided ninety calendar days in which to regain compliance with the
minimum bid price  requirement.  Compliance would be demonstrated with a minimum
bid price of $1.00 or greater for ten  consecutive  trading days anytime  within
the next ninety calendar days.  However, if the Company is unable to demonstrate
compliance  with the minimum  $1.00 bid price on or before the end of the ninety
day period,  the Company's  securities will be subject to delisting.  The NASDAQ
stated  that to stay the  delisting,  the  Company  may request a hearing by the
close of business  on January 22,  1999.  The  Company  intends to request  such
hearing if not in compliance with the minimum bid price requirement on or before
the end of the  ninety day  period.  Future  sales of shares of Common  Stock by
existing  stockholders,  holders  of  preferred  stock  who might  convert  such
preferred  stock into Common  Stock,  and option and warrant  holders also could
adversely affect the market price of the Common Stock.

        No predictions can be made of the effect that future market sales of the
shares of Common  Stock  underlying  the  convertible  securities  and  warrants
referred     to    under    the     caption     "MD&A--Certain     Trends    and
Uncertainties--Subordination  of Common Stock to Series A and Series D Preferred
Stock; Risk of Dilution; Anti-dilution Adjustments," or the availability of such
securities  for  sale,  will  have  on the  market  price  of the  Common  Stock
prevailing  from time to time.  Sales of substantial  amounts of Common Stock or
the perception that such sales might occur,  could adversely  affect  prevailing
market prices.

Certain Interlocking Relationships; Potential Conflicts of Interest.

        The Aries Funds have the contractual  right to appoint a majority of the
members  of the  Board  of  Directors  of the  Company.  The  Aries  Funds  have
designated Michael S. Weiss, Glenn L. Cooper, M.D., Donald G. Drapkin,  Bobby W.
Sandage,  Jr., Ph.D., and Andrew J. Stein as nominees to the Board of Directors.
Such persons were  elected as  Directors  of the Company.  David R. Walner,  the
Secretary of the Company,  is an Associate  Director and  Secretary of Paramount
Capital Asset  Management,  Inc.  ("PCAM").  PCAM is the investment  manager and
general  partner  of  The  Aries  Trust  and  the  Aries  Domestic  Fund,  L.P.,
respectively.  The Aries  Funds  currently  do not hold a  controlling  block of
voting  stock,  although  the Aries  Funds have the  present  right to appoint a
majority of the Board of Directors, and to convert and exercise their securities
into a significant  portion of the outstanding  Common Stock. See "MD&A--Certain
Trends and  Uncertainties--Concentration  of Ownership  and Control"  below.  In
addition to the Aries Funds'  investments  in the Company that are  disclosed in
"Market for Registrant's Common Equity and Related  Stockholder  Matters--Recent
Sales of Unregistered  Securities,"  in the 1997 Annual Report,  the Aries Funds
also engaged in the following transactions: as of June 30, 1997, the Aries Funds
purchased an aggregate of 10,000  shares of Series D Preferred  Stock and 50,000
Class D Warrants in a private placement (the "Private  Placement");  on December
2, 1997,  the Aries Funds  purchased an  aggregate of 54,000  shares of Series A
Preferred  Stock;  on December  29,  1997,  warrants to purchase an aggregate of
1,000  shares  of Series D  Preferred  Stock and  5,000  Class D  Warrants  were
allocated to the Aries Funds by Paramount  Capital,  Inc.,  which  warrants were
received in connection  with the Private  Placement;  on December 31, 1997,  the
Aries Funds  converted  the  outstanding  principal  of, and  interest on, their
respective  Senior  Secured  Convertible  Bridge  Notes of the  Company  into an
aggregate of 52,415 shares of Series D Preferred  Stock; in July 1998, the Aries
Funds purchased  40,000 shares of Series A Preferred  Stock; in August 1998, the
Aries Funds purchased 5,000 shares of Series A Preferred Stock; during the third
quarter 1998, the Aries Funds purchased  701,550 shares of common stock; and the
Aries  Funds  purchased   268,400  shares  of  common  stock  in  October  1998.
Furthermore,  the Company may be required to issue Penalty Warrants to the Aries
Funds. See "Risk Factors--Subordination of Common Stock to Series A and Series D
Preferred Stock;  Risk of Dilution;  Anti-Dilution  Adjustments." Dr. Lindsay A.
Rosenwald,  the President and sole stockholder of PCAM, is also the President of
Paramount  Capital,  Inc.  and  of  Paramount  Capital  Investments  LLC,  a New
York-based   merchant   banking  and  venture   capital  firm   specializing  in
biotechnology  companies  ("PCI").  In the regular  course of its business,  PCI
identifies, evaluates


                                     - 22 -

<PAGE>

and pursues investment  opportunities in biomedical and pharmaceutical products,
technologies and companies.  Generally, Delaware corporate law requires that any
transactions  between the Company  and any of its  affiliates  be on terms that,
when taken as a whole,  are  substantially  as favorable to the Company as those
then  reasonably  obtainable  from  a  person  who is  not  an  affiliate  in an
arms-length  transaction.  Nevertheless,  neither  such  affiliates  nor  PCI is
obligated  pursuant to any agreement or  understanding  with the Company to make
any additional products or technologies  available to the Company, nor can there
be any  assurance,  and the Company does not expect and investors in the Company
should not expect,  that any biomedical or pharmaceutical  product or technology
identified by such affiliates or PCI in the future will be made available to the
Company.  In  addition,  certain of the current  officers  and  directors of the
Company  or  certain of any  officers  or  directors  of the  Company  hereafter
appointed  may  from  time to time  serve  as  officers  or  directors  of other
biopharmaceutical  or  biotechnology  companies.  There can be no assurance that
such other  companies  will not have  interests  in  conflict  with those of the
Company.

Concentration of Ownership and Control.

        The Company's directors,  executive officers and principal  stockholders
and certain of their  affiliates  have the ability to influence  the election of
the Company's directors and most other stockholder  actions.  See "MD&A--Certain
Trends  and   Uncertainties--Certain   Interlocking   Relationships;   Potential
Conflicts of Interest."  Accordingly,  the Aries Funds have the ability to exert
significant  influence over the election of the Company's Board of Directors and
other  matters  submitted to the  Company's  stockholders  for  approval.  These
arrangements  may  discourage  or prevent any proposed  takeover of the Company,
including  transactions in which  stockholders might otherwise receive a premium
for their shares over the then current  market  prices.  Such  stockholders  may
influence corporate actions,  including  influencing  elections of directors and
significant    corporate   events.   See   also   "MD&A--Certain    Trends   and
Uncertainties--Effect of Certain Anti-Takeover Provisions."

Effect of Certain Anti-Takeover Provisions.

        The Company's Restated  Certificate of Incorporation and By-laws include
provisions that could discourage  potential  takeover attempts and make attempts
by stockholders to change management more difficult.  The approval of 66-2/3% of
the Company's  voting stock is required to approve certain  transactions  and to
take  certain  stockholder  actions,  including  the  amendment  of the By-laws.
Additionally, the Company has contractual obligations to certain of its security
holders  that may impair  potential  takeovers.  See  "MD&A--Certain  Trends and
Uncertainties--Certain   Interlocking  Relationships;   Potential  Conflicts  of
Interest." Further, pursuant to the terms of its stockholder rights plan adopted
in December 1993,  the Company has  distributed a dividend of one right for each
outstanding  share of  Common  Stock.  These  rights  will  cause a  substantial
dilution to a person or group that  attempts to acquire the Company on terms not
approved by the Board of Directors and may have the effect of deterring  hostile
takeover  attempts.  The  stockholder  rights  plan was  amended  to permit  the
consummation  of the $3  million  private  placement  in  February  1997 and the
Private Placement in June 1997. Additionally, pursuant to the Company's Restated
Certificate of Incorporation,  if any "person" or "Group" (as defined), together
with any affiliates thereof, becomes the beneficial owner (as defined) of Voting
Shares (as  defined)  of the Company  entitled to exercise  more than 60% of the
total voting power of all  outstanding  Voting Shares of the Company  (including
any Voting Shares that are not then outstanding of which such person or Group is
deemed the beneficial owner) (subject to certain exceptions), then a Fundamental
Change (as defined) would occur and the Company would be obligated to redeem the
Series  A  and  Series  D  Preferred  Stocks.  See  "MD&A--Certain   Trends  and
Uncertainties--Fundamental  Change."  This  Fundamental  Change  provision  is a
further  disincentive  for any person  attempting  to acquire 60% or more of the
total voting power of the Company's Voting Shares.

Risks of Low-Priced  Stock;  Possible Effect of "Penny Stock" Rules on Liquidity
for the Company's Securities.

        If the  Company's  securities  were not listed on a national  securities
exchange nor listed on a qualified  automated  quotation system, they may become
subject to Rule 15g-9 under the Exchange Act, which imposes


                                     - 23 -

<PAGE>

additional  sales  practice   requirements  on  broker-dealers  that  sell  such
securities  to  persons  other  than   established   customers  and  "accredited
investors"  (generally,  individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000 or $300,000 together with their spouses). Rule
15g-9 defines  "penny  stock" to be any equity  security that has a market price
(as therein  defined) of less than $5.00 per share or an exercise  price of less
than $5.00 per share, subject to certain exceptions including (i) the securities
being  quoted  on the  Nasdaq  National  Market  or  SmallCap  Market;  (ii) the
securities' issuer having net tangible assets in excess of $2,000,000 and having
been in continuous operation for at least three years; and (iii) the securities'
issuer having average  revenues of at least  $6,000,000 for the last three years
(all three exceptions  enumerated  above are currently met by the Company).  For
transactions  covered  by  Rule  15g-9,  a  broker-dealer  must  make a  special
suitability  determination  for the purchaser and have received the  purchaser's
written consent to the transaction prior to sale. For any transaction  involving
a  penny  stock,  unless  exempt,  the  rules  require  delivery,  prior  to any
transaction  in a penny  stock,  of a  disclosure  schedule  prepared by the SEC
relating to the penny stock market. Disclosure is also required to be made about
sales  commissions   payable  to  both  the  broker-dealer  and  the  registered
representative  and current  quotations  for the  securities.  Finally,  monthly
statements are required to be sent disclosing  recent price  information for the
penny stock held in the account and  information  on the limited market in penny
stock. Consequently,  such Rule may affect the ability of broker-dealers to sell
the Company's securities and may affect the ability of purchasers to sell any of
the Company's securities in the secondary market.

        There can be no assurance that the Company's securities will continue to
qualify for exemption from the penny stock  restrictions.  In any event, even if
the Company's  securities are exempt from such  restrictions,  the Company would
remain subject to Section  15(b)(6) of the Exchange Act, which gives the SEC the
authority to restrict any person from  participating  in a distribution of penny
stock, if the SEC finds that such a restriction would be in the public interest.

        If the Company's  securities  were subject to the rules on penny stocks,
the market liquidity for the Company's  securities could be materially adversely
affected.


                                     - 24 -

<PAGE>

PART II.       OTHER INFORMATION

Item 1.               Legal Proceedings

        LBC Capital Resources, Inc. ("LBC"), a Philadelphia-based broker/dealer,
has asserted claims against the Company and others,  including Paramount Capital
Inc., of which Dr.  Rosenwald is the sole  stockholder and Mr. Weiss is a Senior
Managing Director, and various related entities and persons. LBC's claims relate
to the alleged  breach by the Company of certain  letter  agreements,  allegedly
entered  into by LBC and the Company in 1995 and 1996 with  respect to brokerage
and/or investment banking services, particularly in connection with a $3 million
investment  for which LBC is seeking a fee. In April 1998 a Complaint  was filed
in the United States  District  Court for the Southern  District of New York (98
Civ. 2491) by LBC against the Company and the same other parties.
The Company is engaged in settlement discussions with LBC.

        On June 4,  1998,  the  Company's  statutory  process  agent  received a
Summons and Complaint in a lawsuit  brought by Johns Hopkins against the Company
in Maryland Circuit Court for Baltimore City (Case No. 98120110).  Johns Hopkins
alleges  in the  Complaint  that the  Company  has  breached  the Johns  Hopkins
Agreement and owes it licensing  royalty fees and related expenses in the amount
of  $308,832.24.  Johns Hopkins also alleges the  existence of a separate  March
1993 letter agreement wherein the Company agreed to support a fellowship program
at the Johns  Hopkins  School of  Hygiene  and Public  Health and the  Company's
breach thereof,  with damages of $326,829.00.  On August 10, 1998, the Company's
statutory  process agent  received a Summons and Complaint in a related  lawsuit
brought by the  Ts'o/Miller  Partnership  and others  against the Company in the
same court (Case No. 98182113).  The Ts'o/Miller  Partnership  claims that it is
owed  licensing  royalty  fees in the  amount of  $287,671.23.  The  Company  is
currently in settlement negotiations.

        On June 30, 1998,  the  Director  General of the  Company's  subsidiary,
Genta  Pharmaceuticals  Europe, SA, ("Genta Europe") was served notice of a suit
in Marseilles,  France by Marseilles  Amenagement,  the manager of the Company's
facilities in Marseilles.  On July 30, 1998, the Company's  office in San Diego,
California  was also served with notice of the suit.  The suit seeks the payment
of unpaid past rents in the amount of  473,464.50  FF (as of November  12, 1998,
approximately  $83,000),  the removal of the Company  from the  facility  and an
indemnity  payment of  1,852,429  FF (as of  November  12,  1998,  approximately
$326,000),  which is  allegedly  equal to the  balance of the first nine  years'
rent. A hearing is scheduled for December 11, 1998.  On July 1, 1998,  the ANVAR
notified Genta Europe by letter of its claim that the Company remains liable for
4,187,423 FF (as of November 12, 1998,  approximately  $737,000) and is required
to pay this amount immediately.  In view of these events, the Board of Directors
of Genta Europe directed the Director General to declare  "Cessation of Payment"
in the commercial court in France,  which  declaration was made in July 1998. On
August 27,  1998,  the  commercial  court  appointed  a trustee  to replace  the
Director General and to represent Genta Europe in its liquidation process.

        JBL  received  notice  on  October  16,  1998  from  Region  IX  of  the
Environmental  Protection  Agency (the "EPA") that it had been  identified  as a
potentially  responsible  party ("PRP") at the Casmalia  Disposal Site, which is
located in Santa Barbara,  California.  JBL has been  designated as a de minimis
PRP by the  EPA.  The EPA  currently  estimates  that de  minimis  PRPs  will be
required to pay as little as $75,000  and as much as  $750,000  to settle  their
potential liability, depending upon the volume of wastes attributed to them. The
EPA  plans on  sending  by the  beginning  of  January  1999  individual  volume
calculations  to each de minimis PRP that  received  the  aforementioned  notice
letter. While the terms of a settlement have not been discussed,  any settlement
with de minimis PRPs should contain standard  contribution  protection language.
JBL is investigating all factual and legal defenses that are available to it and
plans on responding to this matter accordingly.



                                     - 25 -

<PAGE>

        In October 1996,  JBL retained a chemical  consulting  firm to advise it
with respect to an incident of soil and groundwater contamination (the "Spill").
Sampling  conducted at the JBL facility  revealed the presence of chloroform and
perchloroethylenes  ("PCEs") in the soil and  groundwater at this site. Six soil
borings were drilled and groundwater  wells were installed at several  locations
around  the site.  Chloroform  was  detected  at  levels  of up to 190  ug/liter
on-site, exceeding the California Drinking Water Maximum Contamination Level for
trihalomethanes  of 100 ug/liter.  PCEs were also detected at levels of up to 22
ug/liter on-site,  exceeding the California Drinking Water Maximum Contamination
Level of 5 ug/liter.  In  addition,  toluene  was  detected at levels of up to 2
ug/liter at several points on-site,  which is significantly below the California
Toxicity Action Level of 100 ug/liter. These toxicity levels are not binding, as
the final regulatory maximum levels may be higher or lower. JBL has notified the
appropriate  regulatory  agency,  the California  Regional Water Quality Control
Board,  of  conditions  at the  site,  and with the  agency's  approval,  JBL is
monitoring  groundwater  conditions  at the site on a  quarterly  basis.  JBL is
currently in the  pre-regulatory  action stage with ongoing site  monitoring and
site   assessment.   In  addition,   current   sampling  results  indicate  that
contaminants may be migrating off-site. An off-site well, used as a domestic and
irrigation  water source,  has shown evidence of being impacted by chloroform at
1.0  ug/liter,   significantly  below  the  California  Drinking  Water  Maximum
Contamination  Level for  trihalomethanes  of 100  ug/liter,  and toluene at 0.9
ug/liter,  also  significantly  below (less than one percent of) the  California
Toxicity  Action Level of 100  ug/liter.  While  another  off-site well has been
found to contain  chloroform,  the  engineering  consultant  concluded  that the
contaminants  do not appear to relate to impact  from the JBL site.  The Company
believes that any costs  associated  with further  investigating  or remediating
this  contamination  will not have a material  adverse effect on the business of
the Company,  although there can be no assurance thereof. 

        No material  legal  proceedings  were  terminated  in the quarter  ended
September 30, 1998.


Item 5.               Other Information

Stockholder Proposals for 1999 Annual Meeting

        As set  forth in the  Company's  Proxy  Statement  for its  1998  Annual
Meeting of Stockholders,  stockholder proposals submitted pursuant to Rule 14a-8
under the Securities  Exchange Act of 1934, as amended (the "Exchange Act"), for
inclusion  in the  Company's  proxy  materials  for its 1999  Annual  Meeting of
Stockholders  (the "1999 Annual  Meeting")  must be received by the Secretary of
the Company at the  principal  offices of the Company no later than February 22,
1999.

         In addition,  the Company's  by-laws  require that the Company be given
advance notice of stockholder nominations for election to the Company's Board of
Directors.  Such  stockholder  proposals  shall  be made by  notice  in  writing
delivered or mailed by first-class United States mail or a nationally recognized
courier service, postage prepaid, or her to the secretary or assistant secretary
of the corporation,  and received by him or her not less than one hundred twenty
days prior to the 1999 Annual Meeting; provided,  however, that if less than one
hundred days' notice of the meeting is given to  stockholders,  such  nomination
shall have been mailed or delivered to the secretary or the assistant  secretary
of the  corporation  not later than the close of  business  on the  seventh  day
following  the day on which the notice of meeting  was  mailed.  The 1999 Annual
Meeting is currently  expected to be held on July 13, 1999.  Assuming  that this
date does not change,  in order to comply with the time periods set forth in the
Company's  by-laws,  appropriate  notice would need to be provided no later than
March 15, 1999.

        The  Company's  by-laws also  require that the Company be given  advance
notice of stockholder  proposals  regarding  matters other than  nominations for
election  to the  Company's  Board of  Directors  and  matters  included  in the
Company's  proxy  statement in accordance  with Rule 14a-8.  The required notice
must be made in writing and  delivered or mailed to the Secretary of the Company
at the principal offices of the Company,  and received not less than 50 days nor
more than 75 days prior to the 1999 Annual Meeting;  provided,  however, that if
less than 65 days' notice or prior public  disclosure of the date of the meeting
is given to  stockholders,  such nomination or other proposal to be timely shall
have been mailed or delivered to the  Secretary  and received not later than the
close of business on the 15th day  following the date on which the notice of the
meeting was mailed or such  public  disclosure  made,  whichever  occurs  first.
Assuming  that the date of the 1999 Annual  Meeting given above does not change,
in order to comply  with the time  periods set forth in the  Company's  by-laws,
appropriate  notice would need to be provided no earlier than April 29, 1999 and
no later than May 24,  1999.  The advance  notice  provisions  of the  Company's
by-laws supersede the notice requirements contained in recent amendments to Rule
14a-4 under the Exchange Act.

Item 6.        Exhibits and Reports on Form 8-K

        (a)    Exhibits. (1)


Exhibit
Number          Description of Document
------          -----------------------
27.1(1)         Financial Data Schedule

        (b)    Reports on Form 8-K

           (i) On November 3, 1998, the Company filed a Report on Form 8-K dated
as of  October  28,  1998  reporting  under  Item 4 that the  Company's  firm of
independent accountants had resigned.


(1)       Filed herewith.

                                     - 26 -

<PAGE>

                                   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.




                                 GENTA INCORPORATED
                                 (Registrant)



                                 By:    /s/ Kenneth G. Kasses, Ph.D.
                                        --------------------------------------
                                 Name:  Kenneth G. Kasses, Ph.D.
                                 Title: Chairman of the Board of Directors,
                                        President, Principal Executive Officer
                                        and Principal Financial Officer





Date:          November 16, 1998


                                           - 27 -