##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended June 30, 2001

Commission File No. 0-31261

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

|                         |  |                                        
|------------------------ |  | ---------------------------------------
|Georgia                  |  | 58-2108232                             
|                         |  |                                        
|(State of incorporation) |  | (I.R.S. Employer Identification Number)

8995 Westside Parkway, Alpharetta, Georgia 30004

---

(Address of registrants principal executive offices, including zip code)




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(Registrants telephone number, including area code): (678) 336-2500

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ]     No [   ]

As of August 10, 2001, there were 27,778,448 shares of the registrants
common stock outstanding.





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TABLE OF CONTENTS



|                                                                                              |                                         |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | --------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                               
|Item 1. Financial Statements                                                                 
|                                                                                              | CONDENSED BALANCE SHEETS               
|                                                                                              | CONDENSED STATEMENTS OF OPERATIONS     
|                                                                                              | STATEMENTS OF CASH FLOWS               
|                                                                                              | NOTES TO CONDENSED FINANCIAL STATEMENTS
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative And Qualitative Disclosures About Market Risk                           
|PART II  OTHER INFORMATION                                                                  
|Item 2. Changes in Securities and Use of Proceeds                                            
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   



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##### Table of Contents



ATHEROGENICS, INC.
FORM 10-Q

INDEX

|           |  |                                                                                       |  |         
|---------- |  | ------------------------------------------------------------------------------------- |  | --------
|           |  |                                                                                       |  | Page No.
|           |  |                                                                                       |  |         
|PART I     |  | FINANCIAL INFORMATION                                                                 |  |         
|          
|          
|          
|          
|          
|Item 1.    |  | Financial Statements (Unaudited)                                                      |  |         
|          
|          
|          
|          
|          
|           |  | Condensed Balance Sheets June 30, 2001 and December 31, 2000 (audited)                |  | 3       
|          
|          
|          
|          
|           |  | Condensed Statements of Operations Three and six months ended June 30, 2001 and 2000  |  | 4       
|          
|          
|          
|          
|           |  | Condensed Statements of Cash Flows Six months ended June 30, 2001 and 2000            |  | 5       
|          
|          
|          
|          
|           |  | Notes to Condensed Financial Statements                                               |  | 6       
|          
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 8       
|          
|          
|          
|          
|          
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 12      
|          
|          
|          
|          
|          
|PART II    |  | OTHER INFORMATION                                                                     |  |         
|          
|          
|          
|          
|          
|Item 2.    |  | Changes in Securities and Use of Proceeds                                             |  | 12      
|          
|          
|          
|          
|          
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 12      
|          
|          
|          
|          
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  | 13      
|          
|          
|          
|          
|          
|SIGNATURES |  |                                                                                       |  | 14      

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

ATHEROGENICS, INC.




CONDENSED BALANCE SHEETS


|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |              |            |  |  | 
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------------------------------------ | ----------- | ---------- | ----------- | --------- | ------------ | ---------- |  |  | 
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            | June 30,    |           | December 31,
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            | 2001        |           | 2000        
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            | (Unaudited) |           | (Audited)   
|                                                  |                                                                                                                                                                    |                                            |                                      | ASSETS      |            |             |           |              |            |  |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Current assets:                                   |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash and cash equivalents                                                                                                                                          |                                            | $                                    | 63,508,843  |            |             | $         | 26,463,070   |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Short-term investments                                                                                                                                             |                                            |                                      | 4,554,108   |            |             |           | 27,518,169   |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts receivable                                                                                                                                                |                                            |                                      | 253,158     |            |             |           | 1,138,244    |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Prepaid expenses, note receivable and other current assets                                                                                                         |                                            |                                      | 665,526     |            |             |           | 545,826      |           
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    | Total current assets                       |                                      |             | 68,981,635 |             |           |              | 55,665,309 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Equipment and leasehold improvements:             |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Laboratory equipment                                                                                                                                               |                                            |                                      | 1,405,438   |            |             |           | 1,352,692    |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Leasehold improvements                                                                                                                                             |                                            |                                      | 1,299,291   |            |             |           | 966,869      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Computer and office equipment                                                                                                                                      |                                            |                                      | 773,651     |            |             |           | 476,276      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Construction in progress                                                                                                                                           |                                            |                                      | 5,000       |            |             |           | 131,185      |           
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    |                                            | 3,483,380                            |             |            |             | 2,927,022 |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Less accumulated depreciation and amortization                                                                                                                     |                                            |                                      | 1,376,243   |            |             |           | 1,152,028    |           
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    |                                            | 2,107,137                            |             |            |             | 1,774,994 |             
|                                                 
|                                                 
|                                                 
|                                                 
|Long-term note receivable                         |                                                                                                                                                                    |                                            | 141,154                              |             |            |             | 158,648   |             
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    | Total assets                               |                                      | $           | 71,229,926 |             |           | $            | 57,598,951 | 
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |              |           
|                                                  |                                                                                                                                                                    |                                            | LIABILITIES AND SHAREHOLDERS EQUITY |             |            |             |           |              |            |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Current liabilities:                              |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts payable                                                                                                                                                   |                                            | $                                    | 285,399     |            |             | $         | 504,991      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued liabilities                                                                                                                                                |                                            |                                      | 2,434,358   |            |             |           | 517,312      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued compensation                                                                                                                                               |                                            |                                      | 482,618     |            |             |           | 640,975      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued development costs                                                                                                                                          |                                            |                                      | 735,718     |            |             |           | 342,210      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Current portion of capitalized lease obligation                                                                                                                    |                                            |                                      | 109,002     |            |             |           | 125,759      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred revenues                                                                                                                                                  |                                            |                                      |            |            |             |           | 1,111,111    |           
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    | Total current liabilities                  |                                      |             | 4,047,095  |             |           |              | 3,242,358  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Long-term portion of capitalized lease obligation |                                                                                                                                                                    |                                            | 21,734                               |             |            |             | 84,907    |             
|                                                 
|                                                 
|                                                 
|                                                 
|Shareholders equity:                             |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Preferred stock, no par value: Authorized  5,000,000 shares                                                                                                       |                                            |                                      |            |            |             |           |             |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Common stock, no par value: Authorized  100,000,000 shares;
issued and outstanding27,709,948 and 23,909,295
at June 30, 2001 and December 31, 2000, respectively |                                            |                                      | 121,847,587 |            |             |           | 103,608,655  |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Warrants                                                                                                                                                           |                                            |                                      | 607,913     |            |             |           | 225,713      |           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred stock compensation                                                                                                                                        |                                            |                                      | (4,606,951  | )          |             |           | (5,930,880   | )         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accumulated deficit                                                                                                                                                |                                            |                                      | (50,688,309 | )          |             |           | (43,638,404  | )         
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accumulated other comprehensive income                                                                                                                             |                                            |                                      | 857         |            |             |           | 6,602        |           
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    | Total shareholders equity                 |                                      |             | 67,161,097 |             |           |              | 54,271,686 | 
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |             
|                                                  |                                                                                                                                                                    | Total liabilities and shareholders equity |                                      | $           | 71,229,926 |             |           | $            | 57,598,951 | 
|                                                  |                                                                                                                                                                    |                                            |                                      |             |            |             |           |              |           

The accompanying notes are an integral part of these condensed financial statements.

3



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##### Table of Contents



ATHEROGENICS, INC.




CONDENSED STATEMENTS OF OPERATIONS


(Unaudited)


|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |           |            | 
|----------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------ | ---------- | ------------------ | --------- | ---------------- | ---------- | --------- | --------- | ---- | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | 
|                                                                  |                                                                                   |                          |            | Three months ended |           | Six months ended
|                                                                  |                                                                                   |                          |            | June 30,           |           | June 30,        
|                                                                  |                                                                                   |                          |            |                    |           |                 
|                                                                  |                                                                                   |                          |            | 2001               |           | 2000             |            | 2001      |           | 2000
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |     
|Revenues:                                                         |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | License fees                                                                      |                          | $          | 277,778            |           |                  | $          | 833,333   |           |      | $          | 1,111,111 |            |   | $          | 1,666,666 |           
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Research and development                                                          |                          |            | 203,467            |           |                  |            | 1,230,717 |           |      |            | 800,556   |            |   |            | 2,488,664 |           
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|                                                                  |                                                                                   | Total revenues           |            |                    | 481,245   |                  |            |           | 2,064,050 |      |            |           | 1,911,667  |   |            |           | 4,155,330  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Operating expenses:                                               |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Research and development, excluding
amortization
of deferred stock compensation   |                          |            | 3,846,895          |           |                  |            | 2,728,397 |           |      |            | 7,418,783 |            |   |            | 5,614,037 |           
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | General and administrative, excluding amortization
of deferred stock compensation |                          |            | 946,621            |           |                  |            | 575,177   |           |      |            | 1,895,272 |            |   |            | 1,361,539 |           
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Amortization of deferred stock compensation                                       |                          |            | 225,576            |           |                  |            | 1,980,221 |           |      |            | 1,020,393 |            |   |            | 3,952,059 |           
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|                                                                  |                                                                                   | Total operating expenses |            |                    | 5,019,092 |                  |            |           | 5,283,795 |      |            |           | 10,334,448 |   |            |           | 10,927,635 | 
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|Operating loss                                                    |                                                                                   |                          | (4,537,847 | )                  |           |                  | (3,219,745 | )         |           |      | (8,422,781 | )         |            |   | (6,772,305 | )        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net interest income                                               |                                                                                   |                          | 588,570    |                    |           |                  | 136,532    |           |           |      | 1,372,876  |           |            |   | 294,299    |          
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|Net loss                                                          |                                                                                   | $                        | (3,949,277 | )                  |           | $                | (3,083,213 | )         |           | $    | (7,049,905 | )         |            | $ | (6,478,006 | )        
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |           |           
|Net loss per share  basic and diluted                            |                                                                                   | $                        | (0.16      | )                  |           | $                | (1.05      | )         |           | $    | (0.29      | )         |            | $ | (2.33      | )        
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |           |           
|Weighted average shares outstanding
 basic and diluted           |                                                                                   |                          | 24,483,242 |                    |           |                  | 2,929,823  |           |           |      | 24,212,963 |           |            |   | 2,782,819  |          
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          
|Pro forma net loss per share  basic and diluted                  |                                                                                   | $                        | (0.16      | )                  |           | $                | (0.18      | )         |           | $    | (0.29      | )         |            | $ | (0.39      | )        
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |           |           
|Pro forma weighted average shares outstanding
 basic and diluted |                                                                                   |                          | 24,483,242 |                    |           |                  | 16,788,925 |           |           |      | 24,212,963 |           |            |   | 16,560,740 |          
|                                                                  |                                                                                   |                          |            |                    |           |                  |            |           |           |      |            |           |            |   |            |          

The accompanying notes are an integral part of these condensed financial statements.

4



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##### Table of Contents



ATHEROGENICS, INC.




STATEMENTS OF CASH FLOWS


(Unaudited)


|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |           |            |            |  
|--------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | --------- | ---------------- | ---------- | ---------- | --------- | ---------- | ---------- | -
|                                                                            |                                              |                                                            |                                                     |           | Six months ended
|                                                                            |                                              |                                                            |                                                     |           | June 30,        
|                                                                            |                                              |                                                            |                                                     |           |                 
|                                                                            |                                              |                                                            |                                                     |           | 2001             |            | 2000      
|                                                                            |                                              |                                                            |                                                     |           |                  |            |           
|Operating Activities:                                                       |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Net loss                                                                    |                                              | $                                                          | (7,049,905                                          | )         |                  | $          | (6,478,006 | )        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Depreciation and amortization                |                                                            |                                                     | 224,215   |                  |            |            | 209,369   |           
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Amortization of deferred stock compensation  |                                                            |                                                     | 1,020,393 |                  |            |            | 3,952,059 |           
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Stock issued for services                    |                                                            |                                                     | 29,778    |                  |            |            |          |           
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Changes in operating assets and liabilities: |                                                            |                                                     |           |                  |            |            |           |           
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Accounts receivable                                        |                                                     |           | 885,086          |            |            |           | (264,271   | )         
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Prepaid expenses, note receivable and other current assets |                                                     |           | (102,206         | )          |            |           | (404,496   | )         
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Accounts payable                                           |                                                     |           | (219,592         | )          |            |           | (307,534   | )         
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Accrued liabilities                                        |                                                     |           | 363,887          |            |            |           | 57,446     |           
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Deferred revenues                                          |                                                     |           | (1,111,111       | )          |            |           | (1,666,666 | )         
|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                            |                                              |                                                            | Net cash used in operating activities               |           |                  | (5,959,455 | )          |           |            | (4,902,099 | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Investing Activities:                                                       |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Purchases of equipment and leasehold improvements                           |                                              |                                                            | (556,358                                            | )         |                  |            | (503,704   | )        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Sales of short-term investments                                             |                                              |                                                            | 22,958,316                                          |           |                  |            |           |          
|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                            |                                              |                                                            | Net cash provided by (used in) investing activities |           |                  | 22,401,958 |            |           |            | (503,704   | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Financing Activities:                                                       |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Payments on capital lease                                                   |                                              |                                                            | (79,930                                             | )         |                  |            | (123,328   | )        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Proceeds from the issuance of common stock in a private placement           |                                              |                                                            | 20,613,750                                          |           |                  |            |           |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Proceeds from the issuance and exercise of preferred stock warrants         |                                              |                                                            |                                                    |           |                  |            | 636,635    |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Proceeds from the exercise of common stock options                          |                                              |                                                            | 69,450                                              |           |                  |            | 160,336    |          
|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                            |                                              |                                                            | Net cash provided by financing activities           |           |                  | 20,603,270 |            |           |            | 673,643    |  
|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |          
|Increase (decrease) in cash and cash equivalents                            |                                              |                                                            | 37,045,773                                          |           |                  |            | (4,732,160 | )        
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cash and cash equivalents at beginning of period                            |                                              |                                                            | 26,463,070                                          |           |                  |            | 13,409,450 |          
|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |          
|Cash and cash equivalents at end of period                                  |                                              | $                                                          | 63,508,843                                          |           |                  | $          | 8,677,290  |          
|                                                                            |                                              |                                                            |                                                     |           |                  |            |            |          
|Supplemental Disclosures of Cash Flow Information:                          |                                              |                                                            |                                                     |           |                  |            |            |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Interest paid                                                               |                                              | $                                                          | 17,157                                              |           |                  | $          | 20,571     |          
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equipment purchased under capitalized lease obligations                     |                                              |                                                            |                                                    |           |                  |            | 222,500    |          

The accompanying notes are an integral part of these condensed financial statements.

5



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##### Table of Contents



ATHEROGENICS, INC.




NOTES TO CONDENSED FINANCIAL STATEMENTS


(Unaudited)


1.      Basis of Presentation

The accompanying unaudited interim condensed financial statements reflect
all adjustments (consisting solely of normal recurring adjustments) which
management considers necessary for a fair presentation of the financial
position, results of operations and cash flows of AtheroGenics for the interim
periods. Certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial statements as
permitted by the rules and regulations of the Securities and Exchange
Commission. Interim results are not necessarily indicative of results for the
full year.

The interim results should be read in conjunction with the financial
statements and notes thereto included in AtheroGenics Annual Report on Form
10-K for the year ended December 31, 2000. Shareholders are encouraged to
review the Form 10-K for a broader discussion of AtheroGenics opportunities
and risks inherent in the business. Copies of the Form 10-K are available on
request.

2.      Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Investments and Hedging Activities. SFAS 133
establishes a new model for accounting for derivatives and hedging activities
and supersedes several existing standards. SFAS 133, as amended by SFAS 137
and SFAS 138, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The adoption of SFAS 133 has not had a material impact on
our financial statements.

3.      Net Loss Per Share and Pro Forma Net Loss Per Share

Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Shares associated with stock options and warrants
and the convertible preferred stock are not included because they are
antidilutive.

Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including pro forma effects of the automatic
conversion of outstanding redeemable convertible preferred stock into shares of
AtheroGenics common stock effective upon the closing of AtheroGenics Initial
Public Offering in August 2000, as if such conversion occurred on the date of
original issuance.

6



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##### Table of Contents



The following is a reconciliation of the numerator and denominator of
basic and diluted and pro forma basic and diluted net loss per share amounts:

|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |            |       |  
|---------------------------- | ------------------------------------------------------------------------------------------------ | ------------------------------------ | - | ------------------ | ----- | ---------------- | - | ---------- | ----- | ---- | - | ---------- | ----- | - | - | ---------- | ----- | -
|                             |                                                                                                  |                                      |   | Three months ended |       | Six months ended
|                             |                                                                                                  |                                      |   | June 30,           |       | June 30,        
|                             |                                                                                                  |                                      |   |                    |       |                 
|                             |                                                                                                  |                                      |   | 2001               |       | 2000             |   | 2001       |       | 2000
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |     
|Basic and diluted:           |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |           
|                            
|                            
|                            
|                            
|                             | Net loss                                                                                         |                                      | $ | (3,949,277         | )     |                  | $ | (3,083,213 | )     |      | $ | (7,049,905 | )     |   | $ | (6,478,006 | )    
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |            |      
|                             | Weighted average shares used in computing
basic and diluted net loss per share                   |                                      |   | 24,483,242         |       |                  |   | 2,929,823  |       |      |   | 24,212,963 |       |   |   | 2,782,819  |      
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |           
|                             |                                                                                                  | Basic and diluted net loss per share |   | $                  | (0.16 | )                |   | $          | (1.05 | )    |   | $          | (0.29 | ) |   | $          | (2.33 | )
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |            |      
|Pro forma basic and diluted: |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |           
|                            
|                            
|                            
|                            
|                             | Shares used above                                                                                |                                      |   | 24,483,242         |       |                  |   | 2,929,823  |       |      |   | 24,212,963 |       |   |   | 2,782,819  |      
|                            
|                            
|                            
|                            
|                             | Pro forma adjustment to reflect weighted average
effect of assumed conversion of preferred
stock |                                      |   |                   |       |                  |   | 13,859,102 |       |      |   |           |       |   |   | 13,777,921 |      
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |            |      
|                             | Pro forma weighted average shares of common
stock outstanding                                    |                                      |   | 24,483,242         |       |                  |   | 16,788,925 |       |      |   | 24,212,963 |       |   |   | 16,560,740 |      
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |           
|                             | Basic and diluted pro forma net loss per share                                                   |                                      | $ | (0.16              | )     |                  | $ | (0.18      | )     |      | $ | (0.29      | )     |   | $ | (0.39      | )    
|                             |                                                                                                  |                                      |   |                    |       |                  |   |            |       |      |   |            |       |   |   |            |      

4.      Deferred Stock Compensation

During 2000 and 1999, in connection with the grant of certain options to
employees and directors, AtheroGenics recorded non-cash deferred stock
compensation of $12,093,928 and $1,895,160, respectively, representing the
difference between the exercise price and the deemed fair value of
AtheroGenics common stock on the dates these stock options were granted.
These amounts are included as a reduction of shareholders equity and are being
amortized over the vesting periods of the individual options, generally four
years, using the graded vesting method. The graded vesting method provides for
vesting of portions of the overall award at interim dates and results in higher
vesting in earlier years than straight-line vesting. The fair value of
AtheroGenics common stock for purposes of this calculation was determined based
on the business factors underlying the value of common stock on the date such
option grants were made. During the six months ended June 30, 2001,
AtheroGenics recorded a total of $911,193 of amortization of deferred stock
compensation, as compared to $3,952,059 during the same period in the prior
year. Through June 30, 2001, the deferred stock compensation has decreased by
$1,395,735 for options that were forfeited.

In June 2001, in connection with the grant of certain warrants as part of
a licensing agreement with National Jewish Medical and Research Center and
options granted for the addition of new members to our Scientific Advisory
Board, AtheroGenics recorded non-cash deferred stock compensation of
$1,092,000. The fair value of the warrants and options for purposes of this
calculation was determined by using the Black Scholes model. These amounts are
included as a reduction of shareholders equity and are being amortized over
the vesting periods of the individual warrants and options, generally four
years, using the graded vesting method. During the six months ended June 30,
2001, AtheroGenics recorded a total of $109,200 of amortization of deferred
stock compensation for these warrants and options.

At June 30, 2001, AtheroGenics had a total of $4,606,951 remaining to be
amortized over the vesting periods of the stock options.

7



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

The following should be read with the financial statements and related
footnotes and Managements Discussion and Analysis of Results of Operations and
Financial Condition included in AtheroGenics Annual Report on Form 10-K for
the year ended December 31, 2000. The results discussed below are not
necessarily indicative of the results to be expected in any future periods.
The following discussion contains forward-looking statements that are subject
to risks and uncertainties which could cause actual results to differ from the
statements made.

OVERVIEW

Since our operations began in 1994, we have focused on the discovery and
development of novel therapeutics for the treatment of chronic inflammatory
diseases. Based on our proprietary vascular protectant technology platform, we
have advanced two drug candidates into development, and are progressing on a
number of other pre-clinical programs. Our lead product candidate, AGI-1067,
is currently in Phase II clinical trials for the treatment and prevention of
post-angioplasty restenosis. Our second product candidate, AGIX-4207, is
currently in Phase I clinical trials to assess the safety and tolerability for
the treatment of rheumatoid arthritis.

On June 19, 2001, we completed a private placement of 3,585,000 shares of
our common stock that raised gross proceeds of $20.6 million. Net proceeds
were approximately $18.8 million. Both new and existing investors participated
in the transaction.

On June 29, 2001, we entered a worldwide exclusive license agreement with
National Jewish to discover and develop novel therapeutics for the treatment of
inflammation and asthma. We plan to use these licensed technologies for the
discovery and development of a new class of anti-inflammatory drug candidates.

To date, we have devoted substantially all of our resources to research
and development. We have not derived any commercial revenues from product
sales and, excluding the effect of certain license fees of a non-recurring
nature received in connection with entering into an exclusive license
agreement, we expect to incur significant losses in most years prior to
deriving any such product revenue as we continue to increase research and
development cost. We have incurred significant losses since we began
operations in 1994 and as of June 30, 2001, we had an accumulated deficit of
$50.7 million. There can be no assurance if or when we will become profitable.
We expect that losses will fluctuate from quarter to quarter and that these
fluctuations may be substantial. Our ability to achieve profitability depends
upon our ability, alone or with others, to complete the successful development
of our product candidates, to obtain required regulatory clearances, and to
manufacture and market our future products.

RESULTS OF OPERATIONS

Comparison of the Three Month Periods Ended June 30, 2001 and 2000

Revenues

Total revenues were $481,245 for the three months ended June 30, 2001,
compared to $2.1 million in the three months ended June 30, 2000. License fees
of $277,778 and $833,333 during the three months ended June 30, 2001 and 2000,
respectively, were attributable to the exclusive license agreement signed in
October 1999 with Schering-Plough Corporation (Schering-Plough). This amount
represents the earned portion of the $5.0 million initial license fee, which
was amortized over 18 months. Research and development revenues related to the
license agreement were $203,467 for the three months ended June 30, 2001 and
$1.2 million for the three months ended June 30, 2000. The decline of total
revenue of $1.6 million is due to the completion of the amortization of the
initial $5 million license fee in April 2001 and the lower billings related our
Phase II clinical study.

Expenses

Research and Development.Research and development expenses were $3.8
million for the three months ended June 30, 2001, compared to $2.7 million for
the three months ended June 30, 2000. The increase of $1.1 million, or 41%,
reflects the planned expansion of our internal research and development
capabilities, higher costs associated with the AGIX-4207 clinical trials and
pre-clinical costs related to our other product development programs.

8



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General and Administrative.General and administrative expenses were
$946,621 for the three months ended June 30, 2001, compared to $575,177 for the
three months ended June 30, 2000. The increase of $371,444, or 65%, was
primarily due to higher professional fees and the addition of administrative
personnel to support the continued growth of our research and development
efforts.

Amortization of Deferred Stock Compensation.In 2000 and 1999, we
recorded non-cash deferred stock compensation totaling approximately $14.0
million for options granted with exercise prices below the deemed fair value
for financial reporting purposes of our common stock on their respective grant
dates. In June 2001, we recorded non-cash deferred stock compensation totaling
approximately $1.1 million for certain warrants granted in connection with a
licensing agreement with National Jewish Medical and Research Center and
options granted to new members of our Scientific Advisory Board. Amortization
of deferred stock compensation was $225,576 for the three months ended June 30,
2001, compared to $2.0 million for the three months ended June 30, 2000. This
deferred stock compensation is being amortized using the graded vesting method,
which results in higher amortization in the earlier years. In addition, an
adjustment of $716,053 was made in the second quarter of 2001 to reduce
amortization expense for options that have been forfeited.

Net Interest Income

Net interest income was $588,570 for the three months ended June 30, 2001
as compared to net interest income of $136,532 for the three months ended June
30, 2000. The increase in net interest income was due to an increased level of
investments with funds received from our Initial Public Offering.

Comparison of the Six Month Periods Ended June 30, 2001 and 2000

Revenues

Total revenues were $1.9 million for the six months ended June 30, 2001,
compared to $4.2 million in the six months ended June 30, 2000. License fees
of $1.1 million and $1.7 million during the six months ended June 30, 2001 and
2000, respectively, were attributable to the exclusive license agreement signed
in October 1999 with Schering-Plough. This amount represents the earned
portion of the $5.0 million initial license fee, which was amortized over 18
months. Research and development revenues related to the license agreement
were $800,556 for the six months ended June 30, 2001 and $2.5 million for the
six months ended June 30, 2000. The total revenue variance of $2.2 million is
due to the completion of the amortization of the initial $5.0 million license
fee in April 2001 and the lower billings related our Phase II clinical study.

Expenses

Research and Development.Research and development expenses were $7.4
million for the six months ended June 30, 2001, compared to $5.6 million for
the six months ended June 30, 2000. The increase of $1.8 million, or 32%,
reflects the planned expansion of our internal research and development
capabilities, higher costs associated with the AGIX-4207 clinical trials and
pre-clinical costs related to our other product development programs.

General and Administrative.General and administrative expenses were $1.9
million for the six months ended June 30, 2001, compared to $1.4 million for
the six months ended June 30, 2000. The increase of $533,733, or 39%, was
primarily due to higher professional fees and the addition of administrative
personnel to support the continued growth of our research and development
efforts.

Amortization of Deferred Stock Compensation.Amortization of deferred
stock compensation was $1.0 million for the six months ended June 30, 2001,
compared to $4.0 million for the six months ended June 30, 2000. This deferred
stock compensation is being amortized using the graded vesting method, which
results in higher amortization in the earlier years. In addition, an
adjustment of $753,666 was made during the first two quarters of 2001 to reduce
amortization expense for options that have been forfeited.

9



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Net Interest Income

Net interest income was $1.4 million for the six months ended June 30,
2001 as compared to net interest income of $294,299 for the six months ended
June 30, 2000. The increase in net interest income was due to an increased
level of investments with funds received from our Initial Public Offering.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through private
placements of preferred stock and our Initial Public Offering of 6.9 million
shares of our common stock that raised net proceeds of $49.4 million. In June
2001, we completed a private placement of 3,585,000 shares of our common stock
that raised gross proceeds of $20.6 million. At June 30, 2001, we had cash,
cash equivalents and short-term investments of $68.1 million, compared with
$54.0 million at December 31, 2000. Working capital at June 30, 2001 was $65.0
million, compared to $52.4 million at December 31, 2000. The increase in cash,
cash equivalents, short-term investments and working capital is primarily due
to the funds received from the private placement of our common stock in June
2001.

Net cash used in operating activities was $6.0 million for the six months
ended June 30, 2001, compared to $4.9 million for the six months ended June 30,
2000. The increase in the use of cash in operating activities is principally
due to the funding of net losses, excluding non-cash charges.

Net cash provided by investing activities was $22.4 million for the six
months ended June 30, 2001, compared to $503,704 used in investing activities
for the six months ended June 30, 2000. Net cash provided by investing
activities during the six months ended June 30, 2001 consisted primarily of the
sales of short-term investments, with the proceeds reinvested in cash
equivalents, partially offset by the purchase of equipment and leasehold
improvements.

Net cash provided by financing activities was $20.6 million for the six
months ended June 30, 2001, compared to $673,643 provided by financing
activities for the six months ended June 30, 2000. Net cash provided by
financing activities in 2001 consisted primarily of $20.6 million received from
the private placement of our common stock in June 2001. Net cash provided by
financing activities in 2000 consisted primarily of proceeds from the exercise
of preferred stock warrants and common stock options.

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



| |  |  | the status of product development;                                                              
| | - |  | ------------------------------------------------------------------------------------------------
|
| |  |  | the time and cost involved in conducting clinical trials and obtaining regulatory approvals;    
|
| |  |  | filing, prosecuting and enforcing patent claims;                                                
|
| |  |  | competing technological and market developments; and                                            
|
| |  |  | our ability to market and distribute our future products and establish new licensing agreements.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the Reform Act)
provides a safe harbor for forward-looking statements made by or on behalf of
AtheroGenics. AtheroGenics and its representatives may from time to time make
written or verbal forward-looking statements, including statements contained in
this report and our other filings with the Securities and Exchange Commission
and in our reports to our shareholders. Generally, the words believe,
expect, intend, estimate, anticipate, will and similar expressions
identify forward-looking statements. All statements which address operating
performance, events or developments that we expect or anticipate will occur in
the future, including projections about our future results of operations or our
financial condition, our licensing relationship with Schering-Plough, our
anticipated product commercialization strategies, and anticipated trends in our
business, are

10



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forward-looking statements within the meaning of the Reform Act.
The forward-looking statements are and will be based on managements then
current views and assumptions regarding future events and operating
performance, and
speak only as of their dates. AtheroGenics undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.

The following are some of the factors that could affect our financial
performance or could cause actual results to differ materially from those
expressed or implied in our forward-looking statements:



| |  |  | AGI-1067 and AGIX-4207 may fail in clinical trials;                                                                                                                                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to generate positive cash flow in light of our history of operating losses;                                                                                                                                                                                           
|
| |  |  | our ability to successfully develop our other product candidates;                                                                                                                                                                                                                 
|
| |  |  | our ability to commercialize our product candidates if we fail to
demonstrate adequately their safety and efficacy;                                                                                                                                                               
|
| |  |  | possible delays in our clinical trials;                                                                                                                                                                                                                                           
|
| |  |  | our inability to predict whether or when we will obtain regulatory
approval to commercialize our product candidates or the timing of any
future revenue from these product candidates;                                                                                            
|
| |  |  | if Schering-Plough decides to terminate our exclusive license
agreement, we would lose access to their substantial development,
commercial and financial resources, which could materially adversely
affect our ability to develop and commercialize AGI-1067;                    
|
| |  |  | the receipt and timing of milestone payments from Schering-Plough is
uncertain;                                                                                                                                                                                                   
|
| |  |  | our ability to protect adequately or enforce our intellectual
property rights or secure rights to third party patents;                                                                                                                                                            
|
| |  |  | the ability of our competitors to develop and market
anti-inflammatory products that are more effective, have fewer side
effects or are less expensive than our current or future product
candidates;                                                                             
|
| |  |  | third parties failure to synthesize and manufacture our product
candidates could delay our clinical trials or hinder our
commercialization prospects;                                                                                                                            
|
| |  |  | our ability to create sales, marketing and distribution capabilities
or enter into agreements with third parties to perform these functions;                                                                                                                                      
|
| |  |  | our ability to attract, retain and motivate skilled personnel and cultivate key academic collaborations;                                                                                                                                                                          
|
| |  |  | if we need additional financing and cannot obtain it, we may not be able to develop or market our products;                                                                                                                                                                       
|
| |  |  | our ability to obtain an adequate level of reimbursement or acceptable prices for our products; and                                                                                                                                                                               
|
| |  |  | if plaintiffs bring product liability lawsuits against us, we may
incur substantial financial loss or may be unable to obtain future
product liability insurance at reasonable prices, if at all, either of
which could diminish our ability to commercialize our future products.

The foregoing list of important factors is not exclusive.

11



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Item 3.       Quantitative And Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to changes in U.S. interest
rates. This exposure is directly related to our normal operating activities.
Our cash, cash equivalents and short-term investments are invested with high
quality issuers and are generally of a short-term nature. Interest rates
payable on our lease obligations are generally fixed. As a result, we do not
believe that near-term changes in interest rates will have a material effect on
our future results of operations.




PART II  OTHER INFORMATION




Item 2.      Changes in Securities and Use of Proceeds

On June 19, 2001, we sold 3,585,000 shares of our common stock at a price
per share of $5.75 to 19 institutional and sophisticated investors in a private
placement. The net proceeds from the private placement were $18.8 million
after deducting offering expenses of $1.8 million. In connection with this
transaction, we filed a registration statement with the SEC on June 29, 2001 to
register the shares for resale.

On June 29, 2001, we issued a warrant to National Jewish Medical and
Research Center purchase up to 40,000 shares of common stock at an exercise
price of $6.00 per share in connection with an exclusive license agreement. In
a related transaction, we also granted warrants to purchase up to 30,000 shares
of common stock at an exercise price of $6.00 per share to each of Erwin W.
Gelfand, M.D. and Gary L. Johnson, Ph.D., the principal inventors of the
technology licensed under the license agreement, in consideration for the sale
of a limited liability company owned by Drs. Gelfand and Johnson. All of the
warrants are subject to a vesting period, and are exercisable until June 2011.

The issuance of the warrants and the shares of common stock sold in the
private placement were deemed to be exempt from registration under the
Securities Act of 1933 in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving a public offering. The recipients of
securities in each transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in these transactions. All recipients had
adequate access, through their relationships with us, to information about us.

The Securities and Exchange Commission declared our Registration Statement
on Form S-1 (File No. 333-31140) effective August 8, 2000. The net proceeds
from the sale of the 6,900,000 shares of common stock registered pursuant to
the Registration Statement (including the exercise of the underwriters
over-allotment option) were $49.4 million after deducting underwriting
discounts of $3.9 million and offering expenses of $1.9 million.

We expect to use the proceeds from our Initial Public Offering for
research and development activities, including clinical trials, process
development and manufacturing support, and for general corporate purposes,
including working capital. A portion of the proceeds may be used to acquire or
invest in complementary businesses, products or technologies. As of June 30,
2001, the proceeds have been applied toward:



| |  |  | purchases of fixed assets and leasehold improvements, $556,000;                           
| | - |  | ------------------------------------------------------------------------------------------
|
| |  |  | operating activities, $6.0 million; and                                                   
|
| |  |  | investments in highly liquid,
interest bearing, investment grade securities, $4.6 million.




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

Our annual meeting of shareholders was held on April 18, 2001. At the
annual meeting, the shareholders of AtheroGenics (1) elected one Class I
director to serve until the 2004 Annual Meeting of Shareholders, (2) ratified
the appointment of Ernst & Young LLP as our independent auditors for the fiscal
year ending December 31, 2001, and (3) approved the AtheroGenics, Inc. 2001
Equity Ownership Plan.

12



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We had 23,960,305 shares of common stock outstanding as of March 1, 2001,
the record date of the annual meeting. At the annual meeting, we had
19,633,011 shares of common stock present in person or represented by proxy for
the three proposals indicated above. The following sets forth detailed
information regarding the results of the voting at the annual meeting:

Proposal 1.      Election of one Class I director

|                 |  |                  |            |                       |  |  |       |  |  |  |  | 
|---------------- |  | ---------------- | ---------- | --------------------- |  |  | ----- |  |  |  |  | 
|Name of Nominee  |  | No. of Votes For |            | No. of Votes Withheld |  | 
|                 |  |                  |            |                       |  | 
|Vaughn D. Bryson |  |                  | 19,653,461 |                       |  |  | 9,550 |  |  |  |  | 

Proposal 2.      Ratification of the appointment of independent auditors

| |  |                  |            |                       |  |            |       |  |  |  |       | 
| |  | ---------------- | ---------- | --------------------- |  | ---------- | ----- |  |  |  | ----- | 
| |  | No. of Votes For |            | No. of Votes Withheld |  | Abstention
| |  |                  |            |                       |  |           
| |  |                  | 19,659,911 |                       |  |            | 1,800 |  |  |  | 1,300 | 

Proposal 3.      Approval of the AtheroGenics, Inc. 2001 Equity Ownership Plan

| |  |                  |            |                       |  |            |           |  |  |  |       | 
| |  | ---------------- | ---------- | --------------------- |  | ---------- | --------- |  |  |  | ----- | 
| |  | No. of Votes For |            | No. of Votes Withheld |  | Abstention
| |  |                  |            |                       |  |           
| |  |                  | 15,123,355 |                       |  |            | 1,136,775 |  |  |  | 6,770 | 




Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

|         |  |                                                                                                                                                                                                                             
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                             
|10.16*   |  | Form of Common Stock Purchase Agreement dated as of June 19, 2001
between AtheroGenics, Inc. and the Purchasers named therein.                                                                                              
|        
|        
|        
|        
|        
|10.17**+ |  | Exclusive License Agreement dated as of June 29, 2001 between
AtheroGenics, Inc. and National Jewish Medical and Research Center.                                                                                           
|        
|        
|        
|        
|        
|*        |  | Filed as the exhibit with the same number with AtheroGenics
Registration Statement on Form S-1, Registration No. 333-64228, on
June 29, 2001, and incorporated herein by reference.                                        
|        
|        
|        
|        
|**       |  | Filed as the exhibit with the same number with Amendment No. 1 to
AtheroGenics Registration Statement on Form S-1, Registration No.
333-64228, on July 23, 2001 and incorporated herein by reference.                      
|        
|        
|        
|        
|+        |  | Certain confidential information contained in this document will
omitted and filed separately with the Commission pursuant to a request
for confidential treatment under Rule 406 of the Securities Act of
1933, as amended.

(b)  Reports on Form 8-K



| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | We filed a report on Form 8-K on May 21, 2001 under Item 5 to report the
Phase II clinical results for AGI-1067.



| |                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We filed a report on Form 8-K on June 19, 2001 under Item 5 describing our
plans to complete a private placement of 3,585,000 shares of our common
stock to new and existing shareholders in order to raise gross proceeds of
$20.6 million.

13



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|      |  |                  |  |                                                   |  |                        | 
|----- |  | ---------------- |  | ------------------------------------------------- |  | ---------------------- | 
|      |  |                  |  | ATHEROGENICS, INC.                               
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|Date: |  | August 13, 2001. |  | By:                                               |  | /s/ RUSSELL M. MEDFORD
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|      |  |                  |  | RUSSELL M. MEDFORD, M.D., PH.D. President and    
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|      |  |                  |  | Chief Executive Officer                          
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|Date: |  | August 13, 2001. |  | By:                                               |  | /s/ MARK P. COLONNESE 
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|      |  |                  |  | MARK P. COLONNESE                                
|      |  |                  |  | Vice President of Finance and Administration and 
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|      |  |                  |  | Chief Financial Officer (Principal Accounting and
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|      |  |                  |  | Financial Officer)                               

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