##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to.
 COMMISSION FILE NUMBER: 0-24469
 GENVEC, INC.
 (Exact
name of Registrant as specified in its charter)
 DELAWARE
    
    23-2705690(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 65 WEST WATKINS MILL ROAD, GAITHERSBURG, MD
    
    20878(Address of principal executive offices)
    
    (Zip code)
 : 240-632-0740
 NONE
  COMMON STOCK, PAR VALUE $0.001 PER SHARE
 (Title of Class)
 o þ
 o þ
 þ o
 o
  o þ o
 o þ




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##### 



TABLE OF CONTENTS
 PART
NO.
    

ITEM
NO.
    
    DESCRIPTION
    
    PAGE NO.I
    
    
    1
    
    
    BUSINESS
    
    
    21A
    
    
    RISK FACTORS
    
    
    141B
    
    
    UNRESOLVED STAFF COMMENTS
    
    
    242
    
    
    PROPERTIES
    
    
    243
    
    
    LEGAL PROCEEDINGS
    
    
    244
    
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    24II
    
    
    5
    
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
    
    
    266
    
    
    SELECTED FINANCIAL DATA
    
    
    267
    
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    277A
    
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    338
    
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    349
    
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    349A
    
    
    CONTROLS AND PROCEDURES
    
    
    349B
    
    
    OTHER INFORMATION
    
    
    35III
    
    
    10
    
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    3611
    
    
    EXECUTIVE COMPENSATION
    
    
    3812
    
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    4013
    
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    4214
    
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    42IV
    
    
    15
    
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    44FINANCIAL STATEMENTS
    
    
    F1  F23
 THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (EXCHANGE ACT). FORWARD-LOOKING STATEMENTS ALSO MAY BE INCLUDED IN OTHER STATEMENTS THAT
WE MAKE. ALL STATEMENTS THAT ARE NOT DESCRIPTIONS OF HISTORICAL FACTS ARE FORWARD-LOOKING
STATEMENTS, BASED ON MANAGEMENTS ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT ARE SUBJECT TO RISKS
AND UNCERTAINTIES. THESE STATEMENTS CAN GENERALLY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS BELIEVES, EXPECTS, INTENDS, MAY, WILL, SHOULD, OR ANTICIPATES OR
SIMILAR TERMINOLOGY. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE AS OF THE DATE THEREOF, ACTUAL RESULTS, COULD DIFFER MATERIALLY FROM
THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING RISKS RELATING TO THE EARLY STAGE
OF GENVECS PRODUCT CANDIDATES UNDER DEVELOPMENT; GENVECS ABILITY TO SECURE AND MAINTAIN
RELATIONSHIPS WITH COLLABORATORS; UNCERTAINTIES WITH, AND UNEXPECTED RESULTS AND RELATED ANALYSES
RELATING TO CLINICAL TRIALS OF GENVECS PRODUCT CANDIDATES, INCLUDING THE LENGTH OF TIME REQUIRED
TO ENROLL SUITABLE PATIENT SUBJECTS AND OUR ABILITY TO SECURE CLINICAL TRIAL SITES; THE AMOUNT OF
REVENUES ATTRIBUTABLE TO GENVECS VACCINE PROGRAM; THE TIMING AND CONTENT OF FUTURE U.S. FOOD AND
DRUG ADMINISTRATION REGULATORY ACTIONS WITH RESPECT TO GENVEC, ITS PRODUCT CANDIDATES, OR ITS
COLLABORATORS; DEPENDENCE ON THE EFFORTS OF THIRD PARTIES; COMPETITION FROM OTHER PHARMACEUTICAL OR
BIOTECHNOLOGY COMPANIES; THE SCOPE AND VALIDITY OF PATENT PROTECTION FOR GENVECS PRODUCTS AND
GENVECS ABILITY TO COMMERCIALIZE ITS PRODUCTS WITHOUT INFRINGING THE PATENT RIGHTS OF OTHERS;
RISKS THAT GENVEC MAY LACK THE FINANCIAL RESOURCES AND ACCESS TO CAPITAL TO FUND ITS OPERATIONS,
INCLUDING GENVECS ABILITY TO FULLY UTILIZE THE COMMITTED EQUITY FACILITY (CEFF) WITH KINGSBRIDGE
CAPITAL LIMITED AS A SOURCE OF FUTURE FUNDING, WHETHER DUE TO THE MAXIMUM NUMBER OF 12,735,050
SHARES ISSUABLE UNDER THE CEFF CONSISTENT WITH NASDAQ NATIONAL MARKET LISTING REQUIREMENTS,
GENVECS ABILITY TO SATISFY VARIOUS CONDITIONS TO DRAW DOWN UNDER THE CEFF, THE INVESTORS
PERFORMANCE OF ITS OBLIGATIONS UNDER THE CEFF OR OTHERWISE; AND RISKS RELATING TO THE
COMMERCIALIZATION, IF ANY, OF GENVECS PROPOSED PRODUCT CANDIDATES (SUCH AS MARKETING,
MANUFACTURING, REGULATORY, PATENT, PRODUCT LIABILITY, SUPPLY AND OTHER RISKS). FURTHER INFORMATION
ON THE FACTORS AND RISKS THAT COULD AFFECT GENVECS BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS, ARE CONTAINED IN GENVECS FILINGS WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION (SEC), WHICH ARE AVAILABLE AT WWW.SEC.GOV. THESE
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS PRESS RELEASE, AND GENVEC ASSUMES NO
DUTY TO UPDATE FORWARD-LOOKING STATEMENTS.
 1




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##### 



PART 1
 ITEM 1. BUSINESS
 OVERVIEW
 
 TNFerade
 
    
    Pancreatic Canceris currently the lead indication for TNFerade. Based on data
from our Phase I and Phase II studies in locally advanced, unresectable pancreatic
cancer, we are enrolling patients for a 330-patient randomized, controlled Phase
II/III trial designed to assess safety and efficacy potential. For this trial, the
primary endpoint is overall survival at 12 months. According to the American Cancer
Society, approximately 32,000 new cases of pancreatic cancer will be diagnosed this
year in the United States, and nearly all of these patients die of their disease.
    
    Rectal Cancer TNFerade is being evaluated in a Phase II trial in rectal cancer
to assess its ability to improve tumor responses in conjunction with standard
chemoradiation. One objective of this study is to achieve better surgical outcomes
in these patients, such as avoidance of colostomy. Approximately 40,000 new cases
of rectal cancer will be diagnosed in the United States this year.
    
    Metastatic Melanoma Based on our Phase I study, we have moved TNFerade into a
proof-of-concept Phase II study in metastatic melanoma. In this study, patients
will receive TNFerade in combination with radiation therapy. Approximately 60,000
new cases of melanoma will be diagnosed in the United States this year.
  Therapeutic Pipeline, in Addition to TNFerade
 
    
    BIOBYPASS®promotes production of vascular endothelial growth factor (VEGF) protein
to stimulate the growth of new blood vessels in areas of the heart lacking sufficient
blood flow. GenVec is collaborating with the Cordis Corporation, a Johnson & Johnson
company, to evaluate the effects of BIOBYPASS on exercise tolerance and heart function
in a randomized, placebo-controlled Phase II trial in 129 patients with advanced heart
disease. This study is being conducted at multiple sites in Europe and Israel.
    
    AdPEDFis being developed for patients with wet age-related macular degeneration
(AMD), the leading cause of blindness in people over the age of 50. We have completed a
dose-escalation Phase I clinical trial of AdPEDF in patients with severe AMD. Data from
this trial demonstrated that AdPEDF was generally well tolerated and showed evidence of
a halt in disease progression for six to twelve months after a single intravitreal
injection of AdPEDF. In February 2005, we expanded the Phase I clinical testing of
AdPEDF in AMD patients with less severe disease and on March 7, 2006, we announced the
completion of enrollment of this 20-patient trial.
 2




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##### 



Vaccines Program
  
    
    Global HIV Vaccine In collaboration with the Vaccine Research Center (VRC) of the
National Institute of Allergy and Infectious Diseases (NIAID), National Institutes of
Health, we are providing adenovector-based vaccine candidates targeted against the major
strains of HIV present in the world. The NIAID is now conducting multiple clinical
trials involving this vaccine candidate, including an international 480-patient Phase II
study. This $50 million multi-year collaboration is being conducted under a subcontract
issued and managed by SAIC-Frederick, Inc. GenVec is currently manufacturing late-stage
clinical supplies for a proof-of-concept efficacy trial (greater than 10,000
individuals) to be conducted and funded by NIAID and expected to commence in 2007.
    
    Malaria In collaboration with the Naval Medical Research Center (NMRC) and the
Malaria Vaccine Initiative, GenVec is generating vaccine candidates for the prevention
of malaria. There are currently 300 million to 500 million cases of malaria in the
world each year resulting in 1.5 to 3 million deaths, mostly among children. GenVec has
produced clinical supplies of a vaccine candidate for Phase I testing of this vaccine
candidate, to be conducted and funded by the NMRC.
    
    Foot and Mouth Disease In a collaboration with the Agricultural Research Service of
the United States Department of Agriculture funded by an inter-agency agreement with the
Department of Homeland Security, GenVec is developing vaccine and anti-viral candidates
for the prevention and containment of foot and mouth disease outbreaks in the United
States. Initial testing showed that cattle challenged with foot and mouth disease did
not develop symptoms.
    
    Seasonal and pandemic influenza GenVec recently expanded its collaboration with the
VRC to supply potential vaccine candidates for seasonal and pandemic flu.
 Ongoing Clinical Studies
 # OFPRODUCT
    
    
    
    
    
    TARGETEDCANDIDATE
    
    DISEASE INDICATION
    
    DEVELOPMENT STAGE
    
    PATIENTSTNFerade
    
    Pancreatic Cancer
    
    Phase II/III - Randomized, Controlled
    
    330Melanoma
    
    Phase II  Proof of Concept
    
    29Rectal Cancer
    
    Phase II  Dose Escalation
    
    10BIOBYPASS
    
    Coronary Artery Disease
    
    Phase II  Randomized, Placebo Controlled
    
    129AdPEDF
    
    Wet Age-Related Macular
    
    Phase I  Dose Comparison, wet AMD
    
    20Degeneration (AMD)
    
    (patient enrollment complete,follow-up ongoing)
 3




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##### 



TNFerade for cancer. Journal of Clinical Oncology
 Pancreatic Cancer. 11
 Rectal Cancer.
 Melanoma.
 Esophageal Cancer.
 BIOBYPASS for severe heart disease 121 121
  4




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##### 



® NOVA NO V A
 AdPEDF for treatment of vision loss.
 Human Gene Therapy
 OUR STRATEGY
  Develop and commercialize our lead product candidate, TNFerade, for the treatment of cancer.
 5




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##### 




    
    The product development process for cancer drugs, particularly those drugs treating
cancers where the current therapy is poor, can typically be accomplished in a relatively
cost-effective manner and short time period;
    
    Improved survival has been used as a basis for approval in pancreatic cancer; and
    
    Pancreatic cancer is an attractive commercial opportunity.
   Develop and commercialize our other product candidates through corporate alliances
 Expand our product candidate pipeline and enhance our technology base.
 PARTNERSHIPS AND COLLABORATIVE RELATIONSHIPS
  Cordis Corporation.
 6




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##### 



Fuso Pharmaceuticals Industries, Ltd.
  National Institute of Allergy and Infectious Diseases (NIAID) of the National Institutes of Health
(NIH).
 U.S. Naval Medical Research Center.
 Malaria Vaccine Initiative.
 U.S. Department of Agriculture (USDA).
 Sponsored Research.
 7




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##### 



DRUG DISCOVERY AND DEVELOPMENT PLATFORM
  
    
    Rapidly put genes into vectors to evaluate gene function and usefulness in therapy;
    
    Deliver our product candidates to specific organs or cell types to avoid systemic exposure;
    
    Achieve efficient gene delivery to and protein expressions in target cells;
    
    Control the amount and duration of production of therapeutic proteins to allow
flexibility in treating different diseases; and
    
    Scale our manufacturing processed to be suitable for commercial production.
   
    
    Adenoviruses do not integrate into the DNA of the target cell, thereby minimizing
the potential for mutations that can occur with other vector systems;
    
    Adenoviruses are naturally eliminated from cells and tissues; and
    
    Vectors derived from adenoviruses have been generally well tolerated in clinical
testing when administered locally. Thousands of patients have been treated, with very few
serious adverse events related to the vector.
 TECHNOLOGY FOR LOCAL DELIVERY AND EXPRESSION OF GENES
 Use of delivery devices
 Delivering genes to cells
 8




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##### 




    
    DART Vectors. We have developed Directed And Restricted Tropism, or DART, vectors
that enable us to create product candidates that deliver genes only to specific cells. In
order to achieve selective delivery to target cells, we remove the ability of the vector to
bind to the cell surface receptors. We then insert new binding sites into the vector that
bind to specific receptors found on the surfaces of target cells. We have a broad
proprietary position covering DART vectors. This technology is being used in our
collaboration with FUSO Pharmaceuticals Industries, Ltd.
    
    UTV Technology. Our proprietary Universal Transduction Vector, or UTV, technology
allows us to create product candidates that deliver genes to essentially all cell types,
including those types that do not contain the adenovirus receptor on their surface. We have
engineered our vectors to contain a new binding site that allows binding to all cells that
we have tested to date.
  Control of gene expression
 TECHNOLOGY FOR PRODUCTION, PURIFICATION, QUALITY ASSESSMENT AND FORMULATION
  
    
    Production and Scale Up.We produce our adenovectors using cell lines grown under
standardized and controlled conditions. We have developed specialized cell lines for
production of our vectors. We have designed our production processes to be scalable for
commercial production and to reduce the potential for contamination.
    
    Purification.We have proprietary methods for the purification of our vectors that
we believe are scalable to commercial levels as well as suitable for small-scale use in
discovery and testing of new product candidates.
    
    Quality Assessment.We have established proprietary methods to assess and confirm
the quality and purity of vectors for research purposes and clinical testing. We use
advanced techniques to determine the physical characteristics of our product candidates as
a means to establish product consistency and purity. We have an issued U.S. patent covering
this technology. We believe these methods are also suitable for quality assessment of
commercial production.
    
    Formulation.We have developed a novel product formulation that improves the
stability of our vectors and is covered by issued U.S. patents. Our formulation allows
products to be conveniently stored, shipped and used. For research purposes, our
formulation enhances the ease and reproducibility of testing.
 9




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##### 



LICENSES FOR THERAPEUTIC GENES
  SOURCE
    
    GENE
    
    NATURE OF LICENSEAsahi Chemical Industry Co.,
Ltd
    
    TNF  alpha
    
    United States, non-exclusive, for gene therapy applicationsScios, Inc.
    
    VEGF121
    
    Worldwide, exclusive for gene therapy applicationsPublic Health Service (PHS)
    
    PEDF
    
    Worldwide, exclusive for ocular and cancer gene therapy
and protein applicationsNorthwestern University
    
    PEDF
    
    Worldwide, exclusive for ocular gene therapy applications
  PATENTS, LICENSES AND PROPRIETARY RIGHTS
  
    
    obtain patents to protect our own products;
    
    obtain licenses to use the technologies of third parties, which may be protected by patents;
    
    protect our trade secrets and know-how; and
    
    operate without infringing the intellectual property and proprietary rights of others.
 Patent rights; licenses
 TNFerade .
 10




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##### 



BIOBYPASS . 121
 AdPEDF product candidates
 UTV technology and DART vectors.
 Production, purification, quality assessment and formulation technology .
  Trade secrets.
 11




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##### 



COMPETITION
     MANUFACTURING AND SUPPLY
   12




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##### 



MARKETING AND SALES
  GOVERNMENT REGULATION
 Regulation of pharmaceutical products.
  
    
    performance of preclinical (animal and laboratory) tests;
    
    submission to the FDA of an IND which must become effective before human clinical
trials may commence;
    
    performance of adequate and well-controlled human clinical trials to establish the
safety and efficacy of the investigational product in the intended target population;
    
    performance of a consistent and reproducible manufacturing process intended for commercial use;
    
    submission to the FDA of a License Application; and
    
    FDA approval of the Biologics License Application, or BLA before any commercial sale
or shipment of the biologic.
    13




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##### 



Other regulations
 EMPLOYEES
  Principal Executive Offices
  Available Information
  ITEM 1A. RISK FACTORS
  RISKS RELATED TO OUR BUSINESS
 We have a history of losses and anticipate future losses.
   14




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##### 



We will have no product revenues in the near term and may need to raise additional capital to
operate our business.
  Our ability to develop, obtain regulatory approval of and commercialize our potential products
depends, in part, on collaborations with other companies. If we are unable to find collaborators,
we may not be able to develop, test and commercialize our products.
  We have experienced, and may continue to experience, delays in conducting our clinical trials.
 .
 We cannot be sure that our collaborators will perform as expected, and collaborations might produce
conflicts that could delay or prevent the development or commercialization of our potential product
candidates and negatively impact our business and financial condition.
  15




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##### 



Our collaboration agreements may prohibit us from conducting research in areas that may compete
with our collaboration products, while our collaborators may not be limited to the same extent.
This could negatively affect our ability to develop products and, ultimately, prevent us from
achieving a continuing source of revenues.
   We are an early stage company deploying unproven technologies, and we may never be able to develop,
get regulatory approval of, or market any of our product candidates.
  
    
    prove to be safe and effective;
    
    meet applicable regulatory standards;
    
    are capable of being manufactured at reasonable costs;
    
    do not infringe the intellectual property rights of third parties;
    
    are superior to products offered by third parties; or
    
    can be marketed successfully.
  16




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##### 



If we fail to adequately show the safety and efficacy of our product candidates, we will not be
able to obtain FDA approval of our product candidates.
  Because we or our collaborators must obtain regulatory approval to market our products in the
United States and in non-U.S. jurisdictions, we cannot predict whether or when we will be permitted
to commercialize our products; failure to comply with applicable regulations can also harm our
business and operations.
 
    
    The pharmaceutical industry is subject to stringent regulation by a wide range of
authorities. We cannot predict whether we or our collaborators will obtain regulatory
approval for any product we develop. No one can market a pharmaceutical product in the
United States until it has completed rigorous preclinical testing and clinical trials of
the product and an extensive regulatory approval process implemented by the FDA. To date,
the FDA has not approved a gene therapy product for sale in the United States. Satisfaction
of regulatory requirements typically takes many years, is dependent upon the type,
complexity and novelty of the product and requires the expenditure of substantial
resources. Of particular significance are the requirements covering research and
development, testing, manufacturing, quality control, labeling and promotion of drugs for
human use. Before commencing clinical trials, we must submit to the FDA and receive
approval from the FDA of an Investigational New Drug application (IND). Clinical trials
are subject to oversight by Institutional Review Boards and the FDA. Clinical trials are
also subject to:
    
    informed consent;
    
    good clinical practices (GCP);
    
    continuing FDA oversight;
    
    potentially large numbers of test subjects; and
    
    potential suspension by us, our collaborators or the FDA at any time if it is
believed that the subjects participating in these trials are being exposed to unacceptable
health risks or if the FDA finds deficiencies in the Investigational New Drug application
or the conduct of these trials.
  17




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##### 



If we or our collaborators are unable to manufacture our products in sufficient quantities or are
unable to obtain regulatory approvals for a manufacturing facility for our products, we may
experience delays, and be unable to meet demand, and may lose potential revenues.
    If successful large-scale manufacturing of gene-based medicines is not possible, we may be unable
to manufacture enough of our product candidates to achieve regulatory approval or market our
products.
  We may experience difficulties or delays in product manufacturing, which are beyond our control and
could harm our business, because we rely on third-party manufacturers.
   18




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##### 



We rely on a limited number of suppliers for some of our manufacturing materials. Any problems
experienced by any of these suppliers could negatively affect our operations.
  We have limited marketing capabilities, and if we are unable to enter into collaborations with
marketing partners or develop our own sales and marketing capability, we may not be successful in
commercializing our products.
  We face substantial competition from other companies and research institutions that are developing
products to treat the same diseases that our product candidates target, and we may not be able to
compete successfully.
   
    
    identifying important genes or delivery mechanisms before us;
    
    developing products or product candidates earlier than we do;
    
    forming collaborations before we do, or precluding us from forming collaborations with others;
    
    obtaining approvals from the FDA or other regulatory agencies for such products more
rapidly than we do;
    
    developing and validating manufacturing processes more rapidly than we do;
    
    obtaining patent protection to other intellectual property rights that would limit
or preclude our ability to use our technologies or develop products; or
    
    developing products that are safer or more effective than those we develop or
propose to develop.
 19




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##### 



RISKS RELATED TO OUR INDUSTRY
 If we are unable to adequately protect our intellectual property rights, our competitors may be
able to take advantage of our research and development efforts to compete with us.
     20




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##### 



If our potential products conflict with intellectual property rights of competitors, universities
or others, then we may be prevented from developing those product candidates.
    If our right to use intellectual property we license from others is affected, our ability to
develop and commercialize our product candidates may be harmed.
 121
   21




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##### 



Adverse events in the field of gene therapy may negatively affect regulatory approval or public
perception of our products or product candidates.
    We may be sued for product liability, which could damage our reputation and expose us to
unanticipated costs.
  
    
    withdrawal of product candidates from our clinical trials;
    
    withdrawal of our products from the market; if they have been approved;
    
    damage to our reputation;
    
    costs of litigation;
    
    substantial monetary awards to plaintiffs; and
    
    decreased demand for our products or product candidates.
 22




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##### 



We use hazardous chemicals and radioactive and biological materials in our business; any liability
or disputes relating to improper handling, storage or disposal of these materials could be time
consuming and costly.
    If reforms in the health care industry make reimbursement for our potential products less likely,
the market for our potential products will be reduced, and we will lose potential sources of
revenue.
  23




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##### 



ITEM 1B. UNRESOLVED STAFF COMMENTS
  ITEM 2. PROPERTIES
   ITEM 3. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  EXECUTIVE OFFICERS OF THE REGISTRANT
 NAME
    
    AGE
    
    PRESENT POSITION WITH THE REGISTRANTPaul H. Fischer, Ph.D.
    
    
    56
    
    
    President and Chief Executive OfficerJeffrey W. Church
    
    
    49
    
    
    Chief Financial Officer, Treasurer and Corporate SecretaryThomas A. Davis, M.D.
    
    
    42
    
    
    Chief Medical OfficerC. Richter King, Ph.D.
    
    
    51
    
    
    Sr. Vice President, Research
  Paul H. Fischer, Ph.D.,
 24




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##### 



Jeffrey W. Church
 Thomas A. Davis, M.D.
 C. Richter King, Ph.D.
 25




---



##### 



PART II
 ITEM 5.
    
    MARKET FOR THE REGISTRANTS COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
   HIGH
    
    LOWFirst Quarter 2005
    
    $
    2.38
    
    
    $
    1.60Second Quarter 2005
    
    $
    2.01
    
    
    $
    1.69Third Quarter 2005
    
    $
    3.00
    
    
    $
    1.81Fourth Quarter 2005
    
    $
    2.08
    
    
    $
    1.52First Quarter 2004
    
    $
    4.23
    
    
    $
    3.03Second Quarter 2004
    
    $
    4.04
    
    
    $
    2.82Third Quarter 2004
    
    $
    3.06
    
    
    $
    2.10Fourth Quarter 2004
    
    $
    2.66
    
    
    $
    1.20
   ITEM 6. SELECTED FINANCIAL DATA
  DECEMBER 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001SUMMARY STATEMENTS OF OPERATIONS:(in thousands, except per share data)Revenue
    
    $
    26,554
    
    
    $
    11,853
    
    
    $
    10,520
    
    
    $
    8,414
    
    
    $
    4,417Operating expenses:Research and development
    
    
    30,802
    
    
    
    23,087
    
    
    
    23,457
    
    
    
    24,352
    
    
    
    16,309General and administrative
    
    
    8,333
    
    
    
    7,884
    
    
    
    8,405
    
    
    
    9,635
    
    
    
    8,609Loss on disposal of assets
    
    
    1,895
    
    
    
    2
    
    
    
    
    
    
    
    8
    
    
    
    140Total operating expenses
    
    
    41,030
    
    
    
    30,973
    
    
    
    31,862
    
    
    
    33,995
    
    
    
    25,058Operating loss
    
    
    (14,476
    )
    
    
    (19,120
    )
    
    
    (21,342
    )
    
    
    (25,581
    )
    
    
    (20,641
    )Other income (loss), net
    
    
    484
    
    
    
    226
    
    
    
    81
    
    
    
    (17
    )
    
    
    1,545Net loss
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )
    
    $
    (25,598
    )
    
    $
    (19,096
    )Basic and diluted net loss per share
    
    $
    (0.24
    )
    
    $
    (0.35
    )
    
    $
    (0.65
    )
    
    $
    (1.17
    )
    
    $
    (1.05
    )Shares used in computing basic and diluted net
loss per share
    
    
    57,823
    
    
    
    54,331
    
    
    
    32,963
    
    
    
    21,816
    
    
    
    18,124
 AS OF DECEMBER 31,2005
    
    2004
    
    2003
    
    2002
    
    2001SUMMARY BALANCE SHEET DATA:(in thousands)Cash, cash equivalents and short-term
investments
    
    $
    31,999
    
    
    $
    30,763
    
    
    $
    26,523
    
    
    $
    17,652
    
    
    $
    19,930Working capital
    
    
    30,477
    
    
    
    26,021
    
    
    
    20,636
    
    
    
    12,471
    
    
    
    17,017Long-term investments
    
    
    
    
    
    
    2,302
    
    
    
    13,438
    
    
    
    2,708
    
    
    
    21,988Total assets
    
    
    41,901
    
    
    
    44,071
    
    
    
    52,684
    
    
    
    31,085
    
    
    
    51,366Long-term debt, less current portion
    
    
    2,351
    
    
    
    3,264
    
    
    
    4,539
    
    
    
    5,921
    
    
    
    5,088Accumulated deficit
    
    
    (149,346
    )
    
    
    (135,594
    )
    
    
    (116,700
    )
    
    
    (95,439
    )
    
    
    (69,841
    )Total stockholders equity
    
    
    31,422
    
    
    
    30,481
    
    
    
    37,026
    
    
    
    15,629
    
    
    
    40,128
 26




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##### 



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES
   Revenue Recognition.
  Clinical Trial Expenses and Research and Development Activities:
 27




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##### 



EstimatedCompletionClinical Phase
    
    DatePhase I
    
    1 - 3 yearsPhase II
    
    1 - 4 yearsPhase III
    
    2 - 5 years
  
    
    the number of patients that ultimately participate in the trial;
    
    the duration of patient follow-up that seems appropriate in view of the results;
    
    the number of clinical sites included in the trials; and
    
    the length of time required to enroll suitable patient subjects.
     28




---



##### 



TNFerade
 BIOBYPASS
 PEDF
 29




---



##### 



RECENT ACCOUNTING PRONOUNCEMENTS
   OVERVIEW
     30




---



##### 



RESULTS OF OPERATIONS
 YEARS ENDED DECEMBER 31, 2005 AND 2004
 REVENUE
 Revenue.
 OPERATING EXPENSES
 Research and development.
 General and administrative.
 Loss on disposal of assets
 OTHER INCOME (LOSS)
  YEARS ENDED DECEMBER 31, 2004 AND 2003
 REVENUE
 Revenue.
 31




---



##### 



OPERATING EXPENSES
 Research and development.
 General and administrative.
 OTHER INCOME (EXPENSE)
  LIQUIDITY AND CAPITAL RESOURCES
   Payments Due by Period (000s)Less thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    After 5 yearsDebt
    
    $
    3,264
    
    
    $
    913
    
    
    $
    2,351
    
    
    $
    
    
    
    $
    Operating leases
    
    
    3,698
    
    
    
    1,454
    
    
    
    1,567
    
    
    
    677
    
    
    
    Total contractual obligations
    
    $
    6,962
    
    
    $
    2,367
    
    
    $
    3,918
    
    
    $
    677
    
    
    $
    
 32




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##### 



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Cash and cash equivalents
    
    $
    6.8
    millionShort-term investments
    
    $
    25.2
    million
 33




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Other Information
   34




---



##### 



Managements Report on Internal Control over Financial Reporting
  ITEM 9B. OTHER INFORMATION
      35




---



##### 



PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   Directors with Terms Expiring in 2006
 Thomas H. Fraser, Ph.D. ,
 Paul H. Fischer, Ph.D. ,
 Wayne T. Hockmeyer, Ph.D., honoris causa
 Directors with Terms Expiring in 2007
 Zola P. Horovitz, Ph.D.,
 36




---



##### 



William N. Kelley, M.D.,
 Harold R. Werner
 Directors with Terms Expiring in 2008
 Barbara H. Franklin , age 65 th
 Stelios Papadopoulos, Ph.D. ,
 37




---



##### 



Joshua Ruch
 Section 16(a) Beneficial Ownership Reporting Compliance
    ITEM 11. EXECUTIVE COMPENSATION
  Summary Compensation Table
 Long-TermCompensationAnnual Compensation
    
    AwardsSecuritiesUnderlying
    
    All OtherSalary
    
    Bonus
    
    Options/SARS
    
    CompensationName and Principal Position
    
    Year
    
    ($)
    
    ($)
    
    (#)
    
    (1)Paul H. Fischer, Ph.D.
    
    
    2005
    
    
    $
    331,755
    
    
    $
    25,000
    
    
    
    200,000
    
    
    $
    7,000Chief Executive Officer,
President
    
    
    2004
    
    
    $
    320,072
    
    
    $
    64,014
    
    
    
    150,000
    
    
    $
    8,000and Director
    
    
    2003
    
    
    $
    320,072
    
    
    $
    128,030
    
    
    
    
    
    
    $
    3,500Jeffrey W. Church,
    
    
    2005
    
    
    $
    236,151
    
    
    $
    29,519
    
    
    
    75,000
    
    
    $
    5,904CFO, Treasurer and
Corporate
    
    
    2004
    
    
    $
    229,273
    
    
    $
    28,659
    
    
    
    40,000
    
    
    $
    5,732Secretary
    
    
    2003
    
    
    $
    221,520
    
    
    $
    55,380
    
    
    
    
    
    
    $
    3,003Thomas A. Davis, M.D. (2)
    
    
    2005
    
    
    $
    130,769
    
    
    $
    282,329
    
    
    
    300,000
    
    
    
    Chief Medical Officer
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    C. Richter King, Ph.D.
    
    
    2005
    
    
    $
    207,987
    
    
    $
    25,998
    
    
    
    75,000
    
    
    $
    5,200Senior Vice President,
    
    
    2004
    
    
    $
    199,031
    
    
    $
    37,318
    
    
    
    35,000
    
    
    $
    4,976Research
    
    
    2003
    
    
    $
    192,299
    
    
    $
    48,075
    
    
    
    
    
    
    $
    3,000
 
 (1)
    
    Represents the Companys contribution to GenVecs 401-K Defined Contribution Plan.(2)
    
    Dr. Davis joined the Company on July 26, 2005 with an annual salary of $300,000. Dr.
Davis bonus represents the amount paid to him upon commencement of employment as well as
the amount paid as an annual 2005 bonus of $15,000. 38




---



##### 



Option Grants in Last Fiscal Year
  Potential RealizableNumber of
    
    % of Total
    
    
    
    
    
    
    
    
    
    Value at AssumedSecurities
    
    Options
    
    
    
    
    
    
    
    
    
    Annual Rates of StockUnderlying
    
    Granted to
    
    Exercise
    
    
    
    
    
    Appreciation for theOptions Granted
    
    Employees
    
    Price per
    
    Expiration
    
    Option Term (2)Name
    
    (1)
    
    in 2005
    
    Share
    
    Date
    
    5%
    
    10%Paul H. Fischer, Ph.D.
    
    
    200,000
    
    
    
    12.2
    %
    
    $
    1.88
    
    
    
    1/19/2015
    
    
    $
    236,464
    
    
    $
    599,247Jeffrey W. Church
    
    
    75,000
    
    
    
    4.6
    %
    
    $
    1.88
    
    
    
    1/19/2015
    
    
    $
    88,674
    
    
    $
    224,718Thomas A. Davis, M.D.
    
    
    300,000
    
    
    
    18.4
    %
    
    $
    1.98
    
    
    
    7/25/2015
    
    
    $
    373,563
    
    
    $
    946,683C. Richter King, Ph.D.
    
    
    75,000
    
    
    
    4.6
    %
    
    $
    1.88
    
    
    
    1/19/2015
    
    
    $
    88,674
    
    
    $
    224,718
 
 (1)
    
    One-eighth of each option grant vests six months after the date of grant and the remainder
vests monthly on a pro-rata basis over the following 42 months. The options were granted
under the GenVec 2002 Stock Incentive Plan.(2)
    
    In accordance with the rules and regulations of the Securities and Exchange Commission, such
gains are based on assumed rates of annual compound stock appreciation of 5% and 10% from the
date on which the options were granted over the full term of the options. The rates do not
represent GenVecs estimate or projection of future GenVec common stock prices, and no
assurance can be given that these rates of annual compound stock appreciation will occur. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
 Number of SecuritiesShares
    
    
    
    
    
    Underlying Unexercised
    
    Value of UnexercisedAcquired
    
    
    
    
    
    Options at
    
    In-The-Money Options aton
    
    Value
    
    December 31, 2005
    
    December 31, 2005Name
    
    Exercise
    
    Realized
    

Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisablePaul H. Fischer, Ph.D.
    
    
    65,592
    
    
    $
    98,339
    
    
    
    532,427
    
    
    
    391,044
    
    
    
    
    
    
    
    Jeffrey W. Church
    
    
    
    
    
    
    
    
    
    
    174,790
    
    
    
    42,710
    
    
    
    
    
    
    
    Thomas A. Davis, M.D.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    
    
    
    
    C. Richter King, Ph.D.
    
    
    
    
    
    
    
    
    
    
    170,622
    
    
    
    36,877
    
    
    
    
    
    
    
    
 Compensation of Directors
   39




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##### 



Employment Contracts and Termination of Employment and Change-in-Control Arrangements
     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   40




---



##### 



Number of
    
    Percentage ofName of Beneficial Owner
    
    Shares Owned
    
    Class OwnedHealthCare Ventures LLC (1)
    
    
    10,436,462
    
    
    
    16.4
    %Wellington Management Company, LLP
    
    
    3,357,800
    
    
    
    5.3
    %Thomas H. Fraser, Ph.D. (3)
    
    
    1,193,456
    
    
    
    1.9
    %Barbara Hackman Franklin (3)
    
    
    62,500
    
    
    
    *Wayne T. Hockmeyer, Ph.D. (3)
    
    
    105,000
    
    
    
    *William N. Kelley, M.D. (3)
    
    
    77,500
    
    
    
    *Zola P. Horovitz, Ph.D. (3)
    
    
    114,723
    
    
    
    *Stelios Papadopoulos, Ph.D. (3)
    
    
    412,918
    
    
    
    *Joshua Ruch (2) (3)
    
    
    2,797,837
    
    
    
    4.4
    %Harold R. Werner (1) (3)
    
    
    10,436,462
    
    
    
    16.4
    %Paul H. Fischer, Ph.D. (3)
    
    
    824,479
    
    
    
    1.3
    %Jeffrey W. Church (3)
    
    
    221,935
    
    
    
    *Thomas A. Davis, M.D. (3)
    
    
    61,249
    
    
    
    *C. Richter King, Ph.D. (3)
    
    
    213,539
    
    
    
    *All directors and executive officers as a group
(12 persons)
    
    
    16,522,099
    
    
    
    25.9
    %
 
 *
    
    Represents ownership that does not exceed 1% of the outstanding shares of the Companys
Common Stock.(1)
    
    Healthcare Ventures LLC is an affiliate of and Harold R. Werner is a general partner of
Healthcare Partners II, L.P. (HCP II), Healthcare Partners III, L.P. (HCP III),
Healthcare Partners IV, L.P. (HCP IV), Healthcare Partners V, L.P. (HCP V), and
Healthcare Partners VI, L.P. (HCP VI), the general partner of Healthcare Ventures II, L.P.
(HCV II), Healthcare Ventures III, L.P. (HCV III), Healthcare Ventures IV, L.P. (HCV
IV), Healthcare Ventures V, L.P. (HCV V) and Healthcare Ventures VI, L.P. (HCV VI),
respectively. Mr. Werner, together with James H. Cavanaugh, John W. Littlechild, Christopher
K Mirabelli, Gus Lawlor, Eric Aguiar, and William W. Crouse, the other general partners of
HCP II, HCP III, HCP IV, HCP V and HCP VI (collectively, the HC Entities) share voting and
investment control with respect to shares owned by HCV II, HCV III, HCV IV, HCV V and HCV VI,
respectively. Mr. Werner does not own any shares of GenVecs capital stock in his individual
capacity. The address of Healthcare Ventures II, III, IV, V and VI, L.P. is 44 Nassau
Street, Princeton, New Jersey 08542. This information is based on a Schedule 13D filed with
the SEC on August 23, 2003.(2)
    
    Rho Capital Partners, Inc. (Rho), of which Joshua Ruch is Chairman and Chief Executive
Officer, may be deemed the beneficial owner of the shares owned by Rho Management Trust II
pursuant to an investment advisory agreement that confers voting and investment control over
such shares on Rho.Pursuant to a Loan Modification Agreement, dated November 28, 2003 with Nautilis Trust, an
affiliate of Rho, Rho Investment Partners H, L.P., became eligible to purchase an additional
1,639,929 shares of GenVecs common stock, in consideration for the cancellation of a
previously contracted debt. Rho and its affiliate do not have investment control and do not
have voting control over any of such 1,639,929 shares until the satisfaction of the conditions
specified in the Loan Modification Agreement. Neither Rho nor its affiliate has the right to
acquire investment or voting control over any such shares within the next 60 days.The address for Rho Management Trust II is c/o Rho Capital Partners, 152 West 57th Street,
23rd Floor, New York, NY 10019. This information is based on a Schedule 13D filed with the
SEC on September 2, 2003 and Amendment No. 1 thereto filed with the SEC on December 5, 2003.(3)
    
    Includes shares of Common Stock issuable upon exercise of options that are exercisable
within 60 days of February 28, 2006 in the following amounts: Thomas H. Fraser, 381,200
shares; Barbara Hackman Franklin, 57,500 shares; Wayne T. Hockmeyer, 75,500 shares; William
N. Kelley, 72,500 shares; Zola P. Horovitz, 97,138 shares; Stelios Papadopoulos, 107,078
shares; Joshua Ruch, 107,078 shares; Paul H. Fischer, 565,342 shares; Jeffrey W. Church,
220,935 shares; Thomas A. Davis, 56,249 shares; C. Richter King, 213,539 shares; and
directors and officers as a group (12 people) 1,954,059 shares. 41




---



##### 



Equity Compensation Plan Information
  (a)
    
    
    (b)
    
    
    (c)Number ofsecuritiesremainingavailable forNumber of
    
    
    
    
    
    
    future issuancesecurities to be
    
    
    Weighted-
    
    
    under equityissued upon
    
    
    average exercise
    
    
    compensationexercise of
    
    
    price of
    
    
    plans (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected inPlan category
    
    and rights
    
    
    and rights
    
    
    column (a)Equity compensation
plans approved by
security holders
    
    
    5,132,051
    
    
    $
    2.99
    
    
    
    2,563,920Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    5,132,051
    
    
    $
    2.99
    
    
    
    2,563,920
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
   Fee Category
    
    2005
    
    
    2004Audit Fees
    
    $
    374,000
    
    
    $
    380,600Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    12,100
    
    
    
    13,750All Other Fees
    
    
    
    
    
    
    Total
    
    $
    386,100
    
    
    $
    394,350
   42




---



##### 



43




---



##### 



PART IV
 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    (1
    )
    
    Financial Statements  See index to
Financial Statements on page F below
for a list of the financial statements
being filed herein.(2
    )
    
    Financial Statement Schedules  All financial statement schedules are
omitted because they are not applicable, not required under the instructions or all
the information required is set forth in the financial statements or notes thereto.(3
    )
    
    Exhibits  The Exhibits listed in the accompanying Index to Exhibits
are filed or incorporated by reference as part of this report.
 EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    Amended & Restated Certificate of Incorporation of GenVec, Inc. (8)3.1(a)
    
    Certificate of Designation of the Series A Junior Participating Preferred Stock. (8)3.2
    
    Amended & Restated Bylaws of
GenVec, Inc. (13)4.1
    
    Rights Agreement dated as of September 7, 2001 between the Registrant and American Stock Transfer &
Trust Company, the form of Certificate of Designation of Series A Junior Participating Preferred Stock
attached as Exhibit A thereto, the form of Rights Certificate attached as Exhibit B thereto, and the
form of Summary of Rights attached as Exhibit C thereto. (4)4.2
    
    Stock Purchase Agreement dated as of December 21, 2001, by and among HealthCare Ventures V. L.P.,
HealthCare Ventures VI, L.P., and the Registrant. (5)4.3
    
    Investor Rights Agreement, dated as of December 21, 2001, by and among HealthCare Ventures V. L.P.,
HealthCare Ventures VI, L.P., and the Registrant. (5)4.4
    
    Registration Rights Agreement, dated as of March 15, 2006 by and between Kingsbridge Capital Limited
and the Registrant (filed herewith).4.5
    
    Form of Warrant, dated as of March 15, 2006 by and between Kingsbridge Capital Limited and the
Registrant (filed herewith).10.1
    
    Form of Indemnification Agreement for Directors and Officers. (1)10.2
    
    2002 Stock Incentive Plan.* (14)10.3
    
    Amended and Restated 1993 Stock Incentive Plan and forms of agreements thereunder.* (2)10.4
    
    2000 Employee Stock Purchase Plan, and form of agreement thereunder.* (1)10.5
    
    Amended and Restated 2000 Director Option Plan.* (7)10.6
    
    License Agreement dated May 31, 1996 between Scios, Inc. and the Registrant. (1)10.7
    
    New Collaboration Agreement dated January 1, 2003 between Fuso Pharmaceutical Industries, Ltd. and the
Registrant. + (8)10.8
    
    New Commercialization Agreement dated January 1, 2003 between Fuso Pharmaceutical Industries Ltd. and
the Registrant.+ (8)10.9
    
    License Agreement dated February 1, 1998 between Asahi Chemical Industry Co., Ltd. and the Registrant
(12)10.10
    
    Terms of Employment Arrangement
between the Registrant and Thomas A. Davis (15)10.12
    
    Amendment to Common Stock Warrant Agreement dated March 18, 2002 between the Registrant and Cornell
Research Foundation, Inc. (8)10.13
    
    Lease Agreement dated May 4, 1999 between MOR BENNINGTON LLP and the Registrant. (1)10.14
    
    Amended and Restated Registration Rights Agreement dated December 2, 1998 between the Registrant and
certain stockholders. (1)10.15
    
    Patent License Agreement dated January 8, 2000 between the Registrant and the Public Health Service,
as amended, and amendment number 1 hereto dated March 9, 2000. (12)10.16
    
    Patent License Agreement dated December 20, 2000 between the Registrant and Northwestern University.
(3)10.17
    
    Salary Continuation Agreement between the Registrant and Paul H. Fischer dated October 15, 2002. *(8)10.18
    
    Change in Control Agreement between the Registrant and Paul H. Fischer dated October 15, 2002. *(8)10.19
    
    Salary Continuation Agreement between the Registrant and Jeffrey W. Church dated October 15, 2002. *(8)10.20
    
    Change in Control Agreement between the Registrant and Jeffrey W. Church dated October 15, 2002. *(8)
 44




---



##### 



EXHIBITNUMBER
    
    DESCRIPTION10.21
    
    Form of Salary Continuation Agreement between the Registrant and other executive officers
and senior staff dated October 15, 2002. *(8)10.22
    
    Form of Indemnification and
Advancement of Expenses Agreement dated December 10, 2003. (12)10.23
    
    Agreement with the Vaccine Research Center at the National Institute of Allergy and
Infectious Diseases of the National Institutes of Health for the production of adenoviral
vector-based HIV vaccine candidates dated December 31, 2001, and amendment 1 thereto dated
January 25, 2002.+ (7)10.24
    
    Sublease dated January 24, 1991 by and among Diacrin and Building 79 Associated Limited
Partnership and Building 96 Associates Limited Partnership. (10)10.25
    
    Amendment to Sublease dated April 30, 2002. (11)10.26
    
    Research Collaboration Agreement between Cordis Corporation and the Company dated as of
December 22, 2003.+ (12)10.27
    
    Summary of GenVec, Inc. 2006 Annual Bonus Plan * (filed herewith).10.28
    
    Common Stock Purchase Agreement, dated as of March 15, 2006 by and between Kingsbridge
Capital Limited and the Registrant (filed herewith)23.1
    
    Consent of Independent Registered Public Accounting Firm (filed herewith).24.1
    
    Power of Attorney (filed herewith).31.1
    
    Rule 13a-14(a) Certification by Chief Executive Officer (filed herewith).31.2
    
    Rule 13a-14(a) Certification by Chief Financial Officer (filed herewith).32.1
    
    Rule 13a-14(b) Certification by Chief Executive Officer pursuant to 18 United States Code
Section 1350 (filed herewith).32.2
    
    Rule 13a-14(b) Certification by Chief Financial Officer pursuant to 18 United States Code
Section 1350 (filed herewith).
 
 *
    
    Compensatory plan, contract or arrangement.+
    
    Certain portions of this exhibit have been omitted based upon a
request for confidential treatment. The omitted portions have been filed with
the Commission pursuant to our application for confidential treatment.(1)
    
    Incorporated by reference to our Registration Statement on Form
S-1 (File No. 333-47408) declared effective by the Securities and Exchange
Commission on December 12, 2000.(2)
    
    Incorporated by reference from our Registration Statement on Form
S-8 (File No. 333-55590) filed with the Securities and Exchange Commission on
February 14, 2001.(3)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No: 0-24469) filed with the Securities and Exchange Commission on March
30, 2001.(4)
    
    Incorporated by reference from our Registration Statement on Form
8-A (File No: 0-24469) filed with the Securities and Exchange Commission on
September 26, 2001.(5)
    
    Incorporated by reference from our Form 8-K (File No: 0-24469)
filed with the Securities and Exchange Commission on January 3, 2002.(6)
    
    Incorporated by reference from our Quarterly Report on Form 10-Q
(File No: 0-24469) filed with the Securities and Exchange Commission on August
14, 2002.(7)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No. 0-24469) filed with the Securities and Exchange Commission on March
28, 2002.(8)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No. 0-24469) filed with the Securities and Exchange Commission on March
31, 2003.(9)
    
    Incorporated by reference from our Registration Statement on form
S-4 (File No. 333-105320) filed with the Securities and Exchange Commission on
May 16, 2003.(10)
    
    Incorporated by reference from Diacrin, Inc. Form 10-K, as
amended. (File No. 0-20139) filed on April 29, 1992.(11)
    
    Incorporated by reference from Diacrin, Inc. Form 10-K (File No.
0-20139) filed on March 26, 2003.(12)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No. 0-24469) filed with the Securities and Exchange Commission on March
15, 2004.(13)
    
    Incorporated by reference from our Quarterly Report on
Form 10-Q (File No. 0-24469) filed with the Securities and
Exchange Commission on November 10, 2003.(14)
    
    Incorporated by reference from our Quarterly Report on
Form 10-Q (File No. 0-24469) filed with the Securities and
Exchange Commission on August 8, 2005.(15)
    
    Incorporated by reference from our Form 8-K (File
No. 0-24469) filed with the Securities and Exchange Commission
on July 27, 2005. 45




---



##### 



SIGNATURES
  GENVEC, INC.By:
    
    /s/ PAUL H. FISCHER

Paul H. Fischer, Ph.DPresident, Chief Executive Officer and DirectorDate:
    
    March 15, 2006
 SIGNATURES
  TITLE
    
    DATE/s/ PAUL H. FISCHER, PH.D.
    
    President, Chief Executive Officer
    
    March 15, 2006Paul H. Fischer, Ph.D.
    
    and Director(Principal Executive Officer)/s/ JEFFREY W. CHURCH
    
    Chief Financial Officer,
    
    March 15, 2006Jeffrey W. Church
    
    Treasurer & Secretary(Principal Financial andAccounting Officer)*
    
    Director
    
    March 15, 2006Barbara Hackman Franklin*
    
    Director
    
    March 15, 2006Thomas Fraser, Ph.D.*
    
    Director
    
    March 15, 2006Wayne T. Hockmeyer, Ph.D.*
    
    Director
    
    March 15, 2006Zola Horovitz, Ph.D.*
    
    Director
    
    March 15, 2006William N. Kelley, M.D.*
    
    Director
    
    March 15, 2006Stelios Papadopoulos, Ph.D.*
    
    Director
    
    March 15, 2006Joshua Ruch*
    
    Director
    
    March 15, 2006Harold R. Werner
 By:
    
    * /s/ PAUL H. FISCHER, PH.D.

Paul H. Fischer, Ph.D.Attorney-in-Fact
 46




---



##### 



GENVEC, INC.
INDEX TO FINANCIAL STATEMENTS
 PAGE NO.Reportsof Independent Registered Public Accounting Firm
    
    F-1 to F-2Statements of OperationsYears Ended December 31, 2005, 2004 and 2003
    

    F-3Balance Sheets as of December 31, 2005 and 2004
    
    F-4Statements of Cash FlowsYears Ended December 31, 2005, 2004 and 2003
    

    F-5Statements of Stockholders Equity and Comprehensive Loss YearsEnded December 31, 2005, 2004 and 2003
    

    F-6Notes to Financial Statements
    
    F-7 to F-23




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
    Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
  /s/ KPMG LLP
 
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
 /s/ KPMG LLP
 
 F-2




---



##### 



GENVEC, INC.
STATEMENTS OF OPERATIONS
 (in thousands, except share and per share data)Years ended December 31,
    
    2005
    
    
    2004
    
    
    2003Revenue from strategic alliances and research contracts (Note 8)
    
    $
    26,554
    
    
    $
    11,853
    
    
    $
    10,520Operating expenses:Research and development
    
    
    30,802
    
    
    
    23,087
    
    
    
    23,457General and administrative
    
    
    8,333
    
    
    
    7,884
    
    
    
    8,405Loss on disposal of assets (Note 3 and 6)
    
    
    1,895
    
    
    
    2
    
    
    
    Total operating expenses
    
    
    41,030
    
    
    
    30,973
    
    
    
    31,862Operating loss
    
    
    (14,476
    )
    
    
    (19,120
    )
    
    
    (21,342
    )Other income (loss):Interest income
    
    
    908
    
    
    
    612
    
    
    
    389Interest expense
    
    
    (426
    )
    
    
    (386
    )
    
    
    (486
    )Investment gain
    
    
    2
    
    
    
    
    
    
    
    178Total other income, net
    
    
    484
    
    
    
    226
    
    
    
    81Net loss
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )Basic and diluted net loss per share
    
    $
    (0.24
    )
    
    $
    (0.35
    )
    
    $
    (0.65
    )Shares used in computation of basic and diluted net loss per share
    
    
    57,823
    
    
    
    54,331
    
    
    
    32,963
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-3




---



##### 



GENVEC, INC.
BALANCE SHEETS
 (in thousands)As of December 31,
    
    2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,830
    
    
    $
    5,366Short-term investments (Note 4)
    
    
    25,169
    
    
    
    25,397Accounts receivable
    
    
    4,049
    
    
    
    1,544Prepaid expenses and other
    
    
    1,409
    
    
    
    1,821Bond sinking fund (Note 7)
    
    
    296
    
    
    
    276Total current assets
    
    
    37,753
    
    
    
    34,404Property and equipment, net (Notes 5 and 7)
    
    
    4,147
    
    
    
    5,418Long-term investments (Note 4)
    
    
    
    
    
    
    2,302Other assets
    
    
    1
    
    
    
    65Intangible assets (Note 3 and 6)
    
    
    
    
    
    
    1,882Total assets
    
    $
    41,901
    
    
    $
    44,071LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt (Note 7)
    
    $
    913
    
    
    $
    1,227Accounts payable
    
    
    1,180
    
    
    
    1,622Accrued clinical trial expenses
    
    
    457
    
    
    
    1,364Accrued other expenses
    
    
    3,544
    
    
    
    2,128Unearned revenue
    
    
    1,182
    
    
    
    2,042Total current liabilities
    
    
    7,276
    
    
    
    8,383Long-term debt, less current portion (Note 7)
    
    
    2,351
    
    
    
    3,264Other liabilities
    
    
    852
    
    
    
    1,943Total liabilities
    
    
    10,479
    
    
    
    13,590Commitments (Notes 7 and 9)Stockholders equity (Notes 8 and 10):Preferred stock, $0.001 par value, 5,000,000 shares
authorized in 2005 and 2004; none
are issued and outstanding in 2005 and 2004
    
    
    
    
    
    
    Common stock, $0.001 par value, 100,000 shares authorized
in 2005 and 2004; 63,675 and 55,588 shares issued and
outstanding in 2005 and 2004
    
    
    64
    
    
    
    56Additional paid-in capital
    
    
    181,110
    
    
    
    166,656Deferred compensation (Note 10)
    
    
    (121
    )
    
    
    (382
    )Accumulated other comprehensive loss (Notes 4 and 12)
    
    
    (45
    )
    
    
    (255
    )Accumulated deficit
    
    
    (149,586
    )
    
    
    (135,594
    )Total stockholders equity
    
    
    31,422
    
    
    
    30,481Total liabilities and stockholders equity
    
    $
    41,901
    
    
    $
    44,071
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-4




---



##### 



GENVEC, INC.
STATEMENTS OF CASH FLOWS
 (in thousands)Years ended December 31,
    
    2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net loss
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,060
    
    
    
    1,813
    
    
    
    2,608Stock option and warrant compensation (Note 10)
    
    
    261
    
    
    
    229
    
    
    
    1,176Loss on disposal of assets (Note 3 and 6)
    
    
    1,895
    
    
    
    2
    
    
    
    (Gain) on investments
    
    
    (2
    )
    
    
    
    
    
    
    (178
    )Loss on interest rate swap
    
    
    240
    
    
    
    
    
    
    
    Change in accounts receivable
    
    
    (2,505
    )
    
    
    278
    
    
    
    (898
    )Change in accounts payable and accrued expenses
    
    
    67
    
    
    
    (193
    )
    
    
    (1,696
    )Change in unearned revenue
    
    
    (1,634
    )
    
    
    25
    
    
    
    746Change in other assets and liabilities, net
    
    
    102
    
    
    
    676
    
    
    
    (125
    )Net cash used in operating activities
    
    
    (13,508
    )
    
    
    (16,064
    )
    
    
    (19,628
    )Cash flows from investing activities:Purchases of equipment
    
    
    (398
    )
    
    
    (242
    )
    
    
    (568
    )Cash acquired in acquisition, net of transaction costs of $2,445 (Note 3)
    
    
    
    
    
    
    
    
    
    
    4,828Purchases of investment securities
    
    
    (31,570
    )
    
    
    (27,573
    )
    
    
    (19,174
    )Proceeds from sale and maturity of investment securities
    
    
    33,725
    
    
    
    33,394
    
    
    
    33,181Net cash provided by investing activities
    
    
    1,757
    
    
    
    5,579
    
    
    
    18,267Cash flows from financing activities:Proceeds from issuance of common stock, net (Note 10)
    
    
    14,462
    
    
    
    12,099
    
    
    
    3,450Proceeds from debt borrowings
    
    
    
    
    
    
    29
    
    
    
    Payments of long-term debt obligations (Note 7)
    
    
    (1,247
    )
    
    
    (1,494
    )
    
    
    (1,469
    )Net cash provided by financing activities
    
    
    13,215
    
    
    
    10,634
    
    
    
    1,981Net change in cash and cash equivalents
    
    
    1,464
    
    
    
    149
    
    
    
    620Beginning balance of cash and cash equivalents
    
    
    5,366
    
    
    
    5,217
    
    
    
    4,597Ending balance of cash and cash equivalents
    
    $
    6,830
    
    
    $
    5,366
    
    
    $
    5,217Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    265
    
    
    $
    335
    
    
    $
    388Supplemental disclosure of non-cash investing activities:Property and equipment financed by capital leases
    
    
    
    
    
    $
    29
    
    
    $
    50
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-5




---



##### 



GENVEC, INC.
STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS
 (in thousands)AccumulatedAdditional
    
    
    
    
    
    Other Comp-Years ended December 31,
    
    Common Stock
    
    Paid-in
    
    Deferred
    
    rehensive
    
    Accumulated2005, 2004 and 2003
    
    Shares Amount
    
    Capital
    
    Compensation
    
    Income (Loss)
    
    Deficit
    
    TotalBalance, December 31, 2002
    
    
    21,979
    
    
    $
    22
    
    
    $
    112,975
    
    
    $
    (1,590
    )
    
    $
    (339
    )
    
    $
    (95,439
    )
    
    $
    15,629Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,261
    )
    
    
    (21,261
    )Unrealized change in
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    
    
    
    
    (105
    )Unrealized change in cash
flow derivative, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    169Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (21,197
    )Common stock issued under
Shelf registration, net
    
    
    757
    
    
    
    1
    
    
    
    1,848
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,849Common stock issued in
connection with acquisition
    
    
    27,665
    
    
    
    27
    
    
    
    38,504
    
    
    
    (563
    )
    
    
    
    
    
    
    
    
    
    
    37,968Common stock issued under
stock incentive plans
    
    
    949
    
    
    
    1
    
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,601Deferred compensation charge
resulting from stock options
    
    
    
    
    
    
    
    
    
    
    (366
    )
    
    
    1,542
    
    
    
    
    
    
    
    
    
    
    
    1,176Balance, December 31, 2003
    
    
    51,350
    
    
    $
    51
    
    
    $
    154,561
    
    
    $
    (611
    )
    
    $
    (275
    )
    
    $
    (116,700
    )
    
    $
    37,026Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,894
    )
    
    
    (18,894
    )Unrealized change in
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    (137
    )Unrealized change in cash
flow derivative, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    157Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (18,874
    )Common stock issued under
Shelf registration, net
    
    
    4,000
    
    
    
    4
    
    
    
    11,693
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,697Common stock held in
treasury cancelled
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued under
stock incentive plans
    
    
    308
    
    
    
    1
    
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403Deferred compensation charge
resulting from stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229
    
    
    
    
    
    
    
    
    
    
    
    229Balance, December 31, 2004
    
    
    55,588
    
    
    $
    56
    
    
    $
    166,656
    
    
    $
    (382
    )
    
    $
    (255
    )
    
    $
    (135,594
    )
    
    $
    30,481Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,992
    )
    
    
    (13,992
    )Unrealized change in
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (30
    )Adjustment for change in
non-qualifying hedge, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    240Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,782
    )Common stock issued under
Shelf registration, net
    
    
    7,600
    
    
    
    8
    
    
    
    13,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,998Common stock issued under
Stock incentive plans
    
    
    487
    
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    464Deferred compensation charge
resulting from stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    261Balance, December 31, 2005
    
    
    63,675
    
    
    $
    64
    
    
    $
    181,110
    
    
    $
    (121
    )
    
    $
    (45
    )
    
    $
    (149,586
    )
    
    $
    31,422
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-6




---



##### 



NOTES TO FINANCIAL STATEMENTS
 (1) ORGANIZATION AND BUSINESS DESCRIPTION
  
    
    TNFeradeÔ, which is currently in a Phase II/III trial for the treatment
of locally advanced pancreatic cancer and Phase II trials for the treatment of rectal and
melanoma cancer;
    
    BIOBYPASSÒ, which is currently in a randomized,
placebo-controlled Phase II trial for the treatment of severe coronary artery disease. The
Company previously completed a randomized, controlled Phase II study of 67 patients with
severe coronary artery disease using a cardiac surgical procedure; and
    
    PEDF, which has completed enrollment in a Phase Ib trial for the treatment of
wet age-related macular degeneration, a leading cause of blindness in individuals over the
age of 50.
    (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) CASH AND CASH EQUIVALENTS
  (b) INVESTMENTS
   F-7




---



##### 



(c) FAIR VALUE OF FINANCIAL INSTRUMENTS
  (d) PROPERTY AND EQUIPMENT
  (e) REVENUE RECOGNITION
  (f) RESEARCH AND DEVELOPMENT
  (g) CLINICAL TRIAL EXPENSES
  (h) INCOME TAXES
  F-8




---



##### 



(i) NET LOSS PER SHARE
   (j) COMPREHENSIVE LOSS
  (k) INTEREST RATE SWAP
  (l) TECHNOLOGICAL LICENSE AND INTELLECTUAL PROPERTY
  (m) STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN
 Accounting for Stock Issued to
Employees Accounting for Stock-Based Compensation
  2005
    
    2004
    
    2003Net loss  as reported
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )Deduct: Incremental stock-based employee
compensation expense determined under fair
value method for all awards
    
    
    (757
    )
    
    
    (713
    )
    
    
    (484
    )Net loss  pro forma
    
    $
    (14,749
    )
    
    $
    (19,607
    )
    
    $
    (21,745
    )Basic and diluted loss per share  as reported
    
    $
    (0.24
    )
    
    $
    (0.35
    )
    
    $
    (0.65
    )Basic and diluted loss per share  pro forma
    
    $
    (0.26
    )
    
    $
    (0.36
    )
    
    $
    (0.66
    )
 F-9




---



##### 



Accounting for Certain Transaction Involving Stock Compensation
 (n) USE OF ESTIMATES
  (o) RECENT ACCOUNTING PRONOUNCEMENTS
 Accounting Changes and Error Corrections.
 Accounting for Conditional Asset
Retirement Obligations,
 Accounting for Stock-Based Compensation Accounting
for Stock Issued to Employees
 Consolidation of Variable Interest Entities
 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, .
 F-10




---



##### 



(3) BUSINESS ACQUISITION AND DISPOSITION
 (a) ACQUISITION
 Business Combinations
   Value of GenVec common stock issued
    
    $
    35,412Value of Stock Options issued
    
    
    3,120Less amount allocated to deferred compensation
    
    
    (563
    )Transaction costs incurred by GenVec*
    
    
    2,445Acquisition costs
    
    $
    40,414
   Cash and cash equivalents
    
    $
    7,273Short-term investments
    
    
    30,839Other current assets
    
    
    530Long-term investments
    
    
    2,681Property and equipment, net
    
    
    67Intangible assets
    
    
    1,981Total assets acquired
    
    
    43,371Current liabilities
    
    
    1,393Unearned revenue
    
    
    1,564Total liabilities
    
    
    2,957Net assets acquired
    
    $
    40,414
  F-11




---



##### 



(b) DISPOSITION
  (4) INVESTMENTS
  2005GrossUnrealizedAmortized
    
    
    Holding
    
    
    FairCost
    
    
    Gains/(Loss)
    
    
    ValueGovernment and agency notes
    
    $
    2,254
    
    
    $
    (2
    )
    
    $
    2,252Corporate bonds
    
    
    22,960
    
    
    
    (43
    )
    
    
    22,917$
    25,214
    
    
    $
    (45
    )
    
    $
    25,169
 2004GrossUnrealizedAmortized
    
    
    Holding
    
    
    FairCost
    
    
    Gains/(Loss)
    
    
    ValueGovernment agency notes
    
    $
    6,522
    
    
    $
    24
    
    
    $
    6,546Corporate bonds
    
    
    21,200
    
    
    
    (47
    )
    
    
    21,153$
    27,722
    
    
    $
    (23
    )
    
    $
    27,699
  2005
    
    
    2004Due within one year
    
    $
    25,169
    
    
    $
    25,397Due after one year through four years
    
    
    
    
    
    
    2,302$
    25,169
    
    
    $
    27,699
 (5) PROPERTY AND EQUIPMENT
  2005
    
    
    2004Equipment
    
    $
    8,625
    
    
    $
    9,712Leasehold improvements
    
    
    6,474
    
    
    
    6,566Furniture and fixtures
    
    
    414
    
    
    
    51915,513
    
    
    
    16,797Less accumulated depreciation and amortization
    
    
    (11,366
    )
    
    
    (11,379
    )$
    4,147
    
    
    $
    5,418
  F-12




---



##### 



(6) INTANGIBLE ASSETS
  (7) LONG-TERM DEBT
  2005
    
    
    2004Industrial revenue bond
    
    $
    2,580
    
    
    $
    3,130Notes payable:Term loan from landlord
    
    
    440
    
    
    
    531Equipment financing
    
    
    211
    
    
    
    765Economic development loan
    
    
    33
    
    
    
    48Other
    
    
    
    
    
    
    173,264
    
    
    
    4,491Less current maturities
    
    
    (913
    )
    
    
    (1,227
    )$
    2,351
    
    
    $
    3,264
  2006
    
    $
    9132007
    
    
    7542008
    
    
    7902009
    
    
    8072010
    
    
    Thereafter
    
    
    $
    3,264
 (a) INDUSTRIAL REVENUE BOND
   F-13




---



##### 



(b) TERM LOAN
  (c) EQUIPMENT FINANCING
   (d) ECONOMIC DEVELOPMENT LOAN
   (8) STRATEGIC ALLIANCES AND RESEARCH CONTRACTS
  2005
    
    
    2004
    
    
    2003Vaccine Research Center
    
    $
    18,791
    
    
    $
    7,373
    
    
    $
    7,230PATH/Malaria Vaccine Initiative
    
    
    1,496
    
    
    
    979
    
    
    
    US Naval Medical Research Center
    
    
    1,599
    
    
    
    493
    
    
    
    1,361FUSO Pharmaceuticals Industries, Ltd.
    
    
    1,595
    
    
    
    1,616
    
    
    
    1,724Terumo Corporation
    
    
    1,067
    
    
    
    396
    
    
    
    98Cordis Corporation
    
    
    470
    
    
    
    245
    
    
    
    Other strategic alliances and research grants
    
    
    1,536
    
    
    
    751
    
    
    
    107$
    26,554
    
    
    $
    11,853
    
    
    $
    10,520
 F-14




---



##### 



(a) VACCINE RESEARCH CENTER
  (b) PATH/MALARIA VACCINE INITIATIVE (MVI)
  (c) US NAVAL MEDICAL RESEARCH CENTER (NMRC)
   (d) FUSO PHARMACEUTICALS INDUSTRIES, LTD. (Fuso)
  F-15




---



##### 



(e) TERUMO CORPORATION (Terumo)
   (f) CORDIS CORPORATION (Cordis)
 ®
 ® ®
 (g) OTHER STRATEGIC ALLIANCES AND RESEARCH GRANTS
  F-16




---



##### 



(9) COMMITMENTS
 (a) LEASE AGREEMENTS
   2006
    
    
    $1,4542007
    
    
    7752008
    
    
    7922009
    
    
    6772010
    
    
    Thereafter
    
    
    $3,698
  (b) LICENSE AGREEMENTS
    F-17




---



##### 



(c) RESEARCH AND DEVELOPMENT AND CLINICAL AGREEMENTS
    (10) STOCKHOLDERS EQUITY
 (a) CAPITAL STOCK
  
    
    On January 22, 2003 the Company sold 756,800 shares of common stock to an existing
shareholder at $2.50 per share under the shelf registration. Proceeds, net of offering
costs, from this sale totaled $1,849,000.
    
    On April 16, 2004, the Company sold 4,000,000 shares of common stock to various
investors at $3.15 per share under the shelf registration. Proceeds, net of offering costs,
from this sale totaled $11,787,000. Stonegate Securities was engaged as the sole placement
agent for this transaction.
  
    
    On September 26, 2005, the Company sold 7,600,000 shares of common stock to various
investors at $2.00 per share under the shelf registration. Proceeds, net of offering costs,
from this sale totaled $13,990,000. SG Cowen & Co., LLC (SG Cowen) was engaged as the
sole placement agent for this transaction. Stelios Papadopoulos, Ph.D., is a Vice Chairman
in the investment banking division of SG Cowen and is a member of GenVecs board of
directors.
   F-18




---



##### 




    
    4,400,000 shares of $0.001 par value preferred stock have been authorized; none are
issued or outstanding.
    
    600,000 shares of $0.001 par value Series A junior participating preferred stock
have been authorized in connection with the preferred stock purchase rights referred to
above; none are issued or outstanding.
 (b) STOCK OPTION GRANTS
  
    
    On August 21, 2003, in connection with the Diacrin acquisition, the
stockholders approved an increase in the number of common shares to be issued under the
Plan by an additional 1,000,000.
    
    At the Companys Annual Meeting of Stockholders, held on June 15, 2005, the
stockholders approved an increase in the number of common stock shares to be issued
under the Plan by an additional 1,680,000.
   AverageNumber of Shares
    
    Exercise(in thousands, except per share data)
    
    Under Option
    
    PriceOutstanding at December 31, 2002
    
    
    4,640
    
    
    $
    3.18Assumed from acquisition
    
    
    1,937
    
    
    
    2.84Granted
    
    
    209
    
    
    
    2.73Exercised
    
    
    (914
    )
    
    
    1.69Cancelled
    
    
    (1,624
    )
    
    
    3.63Outstanding at December 31, 2003
    
    
    4,248
    
    
    
    3.15Granted
    
    
    1,105
    
    
    
    3.03Exercised
    
    
    (289
    )
    
    
    1.19Cancelled
    
    
    (279
    )
    
    
    3.64Outstanding at December 31, 2004
    
    
    4,785
    
    
    $
    3.20Granted
    
    
    1,633
    
    
    
    1.91Exercised
    
    
    (342
    )
    
    
    0.96Cancelled
    
    
    (1,035
    )
    
    
    3.05Outstanding at December 31, 2005
    
    
    5,041
    
    
    $
    2.97
  F-19




---



##### 



Outstanding
    
    ExercisableAverage
    
    Average
    
    
    
    
    
    AverageShares
    
    Exercise
    
    Remaining
    
    Shares
    
    ExerciseExercise Price
    
    (thousands)
    
    Price
    
    Life
    
    (thousands)
    
    Price$0.00  $1.00
    
    
    57
    
    
    $
    0.72
    
    
    5.7 years
    
    
    34
    
    
    $
    0.73$1.01  $3.00
    
    
    2,514
    
    
    
    2.08
    
    
    
    7.1
    
    
    
    1,214
    
    
    
    2.26$3.01  $4.00
    
    
    1,572
    
    
    
    3.28
    
    
    
    5.9
    
    
    
    1,256
    
    
    
    3.29$4.01  $5.00
    
    
    646
    
    
    
    4.39
    
    
    
    3.3
    
    
    
    646
    
    
    
    4.39$5.01  $10.00
    
    
    252
    
    
    
    6.73
    
    
    
    2.4
    
    
    
    252
    
    
    
    6.735,041
    
    
    $
    2.97
    
    
    6.0 years
    
    
    3,402
    
    
    $
    3.36
   (c) EMPLOYEE STOCK PURCHASE PLAN
    (d) WARRANTS
  2005
    
    2004
    
    2003Exercise Price
    
    Outstanding
    
    Vested
    
    Outstanding
    
    Vested
    
    Outstanding
    
    Vested$3.60
    
    
    66
    
    
    
    66
    
    
    
    66
    
    
    
    66
    
    
    
    66
    
    
    
    66$3.93
    
    
    25
    
    
    
    25
    
    
    
    31
    
    
    
    31
    
    
    
    56
    
    
    
    56$8.85
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    318
    
    
    
    318
    
    
    
    31891
    
    
    
    91
    
    
    
    415
    
    
    
    415
    
    
    
    440
    
    
    
    440
 F-20




---



##### 



(11) INCOME TAXES
  2005
    
    
    2004
    
    
    2003Tax provision computed at the statutory rate
    
    $
    (4,676
    )
    
    $
    (6,424
    )
    
    $
    (7,229
    )State income taxes, net of federal income tax provision
    
    
    (962
    )
    
    
    (751
    )
    
    
    ( 982
    )Book expenses not deductible for tax purposes
    
    
    7
    
    
    
    8
    
    
    
    8Research and experimentation tax credit
    
    
    (1,146
    )
    
    
    (787
    )
    
    
    (460
    )Nondeductible compensation expense
    
    
    94
    
    
    
    89
    
    
    
    381Change in valuation allowance for deferred tax assets
    
    
    6,683
    
    
    
    7,865
    
    
    
    8,282Income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    
    2005
    
    
    2004
    
    
    2003Net operating loss carryforwards
    
    $
    76,689
    
    
    $
    71,682
    
    
    $
    64,695Capital loss carryforwards
    
    
    328
    
    
    
    328
    
    
    
    Research and experimentation tax credit
    
    
    10,425
    
    
    
    9,279
    
    
    
    8,492Deferred rent
    
    
    178
    
    
    
    
    
    
    
    Unearned revenue
    
    
    
    
    
    
    485
    
    
    
    465Property and equipment, principally due to differences in
depreciation
    
    
    (507
    )
    
    
    (655
    )
    
    
    (727
    )Deferred compensation expense
    
    
    747
    
    
    
    785
    
    
    
    873Intangible asset
    
    
    
    
    
    
    (727
    )
    
    
    (765
    )Other
    
    
    151
    
    
    
    139
    
    
    
    426Total deferred tax assets
    
    
    88,011
    
    
    
    81,316
    
    
    
    73,459Valuation allowance
    
    
    (88,011
    )
    
    
    (81,316
    )
    
    
    (73,459
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
  F-21




---



##### 



(12) OTHER COMPREHENSIVE INCOME (LOSS)
  Unrealized
    
    
    AccumulatedUnrealized
    
    
    Gain (Loss)
    
    
    OtherGain (Loss)
    
    
    on Derivative
    
    
    Comprehensiveon Securities
    
    
    Instruments
    
    
    Income (Loss)Balance, December 31, 2002
    
    $
    227
    
    
    $
    (566
    )
    
    $
    (339
    )Unrealized gain from available-for-sale securities
    
    
    73
    
    
    
    
    
    
    
    73Loss in operations
    
    
    (178
    )
    
    
    
    
    
    
    (178
    )Unrealized loss on cash flow derivative
    
    
    
    
    
    
    (45
    )
    
    
    (45
    )Interest expense realized in operations
    
    
    
    
    
    
    214
    
    
    
    214Balance, December 31, 2003
    
    $
    122
    
    
    $
    (397
    )
    
    $
    (275
    )Unrealized loss from available-for-sale securities
    
    
    (137
    )
    
    
    
    
    
    
    (137
    )Loss in operations
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on cash flow derivative
    
    
    
    
    
    
    (25
    )
    
    
    (25
    )Interest expense realized in operations
    
    
    
    
    
    
    182
    
    
    
    182Balance, December 31, 2004
    
    $
    (15
    )
    
    $
    (240
    )
    
    $
    (255
    )Unrealized loss from available-for-sale securities
    
    
    (30
    )
    
    
    240
    
    
    
    210Balance, December 31, 2005
    
    $
    (45
    )
    
    $
    
    
    
    $
    (45
    )
  (13) QUARTERLY RESULTS (UNAUDITED)
  2005
    
    Q1
    
    Q2
    
    Q3
    
    Q4Revenue
    
    $
    4,549
    
    
    $
    7,348
    
    
    $
    6,897
    
    
    $
    7,760Net loss
    
    $
    (3,458
    )
    
    $
    (2,956
    )
    
    $
    (3,249
    )
    
    $
    (4,329
    )Basic and Diluted Loss Per Share
    
    $
    (0.06
    )
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.07
    )
 2004
    
    Q1
    
    Q2
    
    Q3
    
    Q4Revenue
    
    $
    2,741
    
    
    $
    3,151
    
    
    $
    2,932
    
    
    $
    3,029Net loss
    
    $
    (5,650
    )
    
    $
    (4,776
    )
    
    $
    (4,789
    )
    
    $
    (3,679
    )Basic and Diluted Loss Per Share
    
    $
    (0.11
    )
    
    $
    (0.09
    )
    
    $
    (0.09
    )
    
    $
    (0.07
    )
  F-22




---



##### 



(14) SUBSEQUENT
EVENT (UNAUDITED)
   F-23