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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

(Mark One)

|                                               |  |                                                                                                                           
|---------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------
|x                                              |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934                                      
|                                               |  |                                                                                                                           
|For the quarterly period ended March 31, 2003.
|                                               |  |                                                                                                                           
|o                                              |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM

TO .
|                                               |  |                                                                                                                           
|Commission file number 0-22170                

Epoch Biosciences, Inc.(Exact name of Registrant as specified in its charter)

|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction of incorporation or organization) |  | 91-1311592(I.R.S. Employer Identification No.)

21720 23rd Drive SE, #150, Bothell, WA 98021(Address of principal executive office, including zip code)

(425) 482-5555(Issuers telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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   o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES   o      NO   x

State the number of shares outstanding of each of the issuers classes of
common equity as of the latest practicable date.

|                             |  |                           
|---------------------------- |  | --------------------------
|Class                        |  | Outstanding at May 7, 2003
|                             |  |                           
|Common Stock, $.01 par value |  | 26,045,302                

Page 1 of 24





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|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part I. Financial Information
|                              | Item 1. 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                           
|                              | Item 4. Controls and Procedures                                                              
|Part II. Other Information   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 6. Exhibits and Reports on Form 8K                                                      
|Signature                    
|Certifications               
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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Epoch Biosciences, Inc.
Index To Form 10-Q

|                              |         |                                                                                       |  |            
|----------------------------- | ------- | ------------------------------------------------------------------------------------- |  | -----------
|                              |         |                                                                                       |  | Page Number
|                              |         |                                                                                       |  |            
|Part I. Financial Information
|                              |         |                                                                                       |  |            
|                              | Item 1. | Financial Statements                                                                  |  | 3          
|                              |         |                                                                                       |  |            
|                              | Item 2. | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  | 9          
|                              |         |                                                                                       |  |            
|                              | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19         
|                              |         |                                                                                       |  |            
|                              | Item 4: | Controls and Procedures                                                               |  | 19         
|                              |         |                                                                                       |  |            
|Part II. Other Information   
|                              |         |                                                                                       |  |            
|                              | Item 1. | Legal Proceedings                                                                     |  | 20         
|                              |         |                                                                                       |  |            
|                              | Item 6. | Exhibits and Reports on Form 8-K                                                      |  | 21         
|                              |         |                                                                                       |  |            
|                              |         | Note: Items 2, 3, 4, and 5 are omitted, as they are not applicable.                   |  |            
|                              |         |                                                                                       |  |            
|Signature                     | 22     
|                              |         |                                                                                       |  |            
|Certifications                | 23     

2



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Part I. Financial Information




Epoch Biosciences, Inc.
Balance Sheets
(unaudited)

|                                            |                                                                                                                                                             |                                            |           |              |            |  |           |             |            | 
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------------ | ---------- |  | --------- | ----------- | ---------- | 
|                                            |                                                                                                                                                             |                                            |           | December 31, |            |  | March 31, |            
|                                            |                                                                                                                                                             |                                            |           | 2002         |            |  | 2003      |            
|                                            |                                                                                                                                                             |                                            |           |              |            |  |           |            
|Assets                                     
|Current assets:                             |                                                                                                                                                             |                                            |           |              |            |  |           |            
|                                            | Cash and cash equivalents                                                                                                                                   |                                            | $         | 3,507,645    |            |  | $         | 3,237,845   |           
|                                            | Accounts receivable                                                                                                                                         |                                            |           | 2,031,600    |            |  |           | 1,431,564   |           
|                                            | Inventory                                                                                                                                                   |                                            |           | 461,381      |            |  |           | 354,659     |           
|                                            | Prepaid expenses and other assets                                                                                                                           |                                            |           | 348,778      |            |  |           | 235,674     |           
|                                            |                                                                                                                                                             |                                            |           |              |            | 
|                                            |                                                                                                                                                             | Total current assets                       |           |              | 6,349,404  |  |           |             | 5,259,742  | 
|Property and equipment, net                 |                                                                                                                                                             |                                            | 3,947,995 |              |            |  | 3,798,974 |            
|Identifiable intangible assets, net         |                                                                                                                                                             |                                            | 1,967,632 |              |            |  | 1,893,757 |            
|Goodwill                                    |                                                                                                                                                             |                                            | 2,151,846 |              |            |  | 2,151,846 |            
|Restricted cash                             |                                                                                                                                                             |                                            | 614,739   |              |            |  | 624,351   |            
|Other assets                                |                                                                                                                                                             |                                            | 24,550    |              |            |  | 19,550    |            
|                                            |                                                                                                                                                             |                                            |           |              |            | 
|                                            |                                                                                                                                                             | Total assets                               |           | $            | 15,056,166 |  |           | $           | 13,748,220 | 
|                                            |                                                                                                                                                             |                                            |           |              |            | 
|Liabilities and Stockholders Equity       
|Current liabilities:                        |                                                                                                                                                             |                                            |           |              |            |  |           |            
|                                            | Current portion of long term obligations                                                                                                                    |                                            | $         | 282,451      |            |  | $         | 308,165     |           
|                                            | Accounts payable                                                                                                                                            |                                            |           | 348,012      |            |  |           | 447,854     |           
|                                            | Accrued liabilities                                                                                                                                         |                                            |           | 1,685,563    |            |  |           | 1,208,630   |           
|                                            | Current portion of deferred revenue                                                                                                                         |                                            |           | 877,258      |            |  |           | 895,258     |           
|                                            |                                                                                                                                                             |                                            |           |              |            | 
|                                            |                                                                                                                                                             | Total current liabilities                  |           |              | 3,193,284  |  |           |             | 2,859,907  | 
|Long term obligations, less current portion |                                                                                                                                                             |                                            | 511,731   |              |            |  | 492,547   |            
|Deferred revenue, less current portion      |                                                                                                                                                             |                                            | 2,324,744 |              |            |  | 2,171,713 |            
|Deferred rent                               |                                                                                                                                                             |                                            | 245,582   |              |            |  | 266,717   |            
|Stockholders equity:                       |                                                                                                                                                             |                                            |           |              |            |  |           |            
|                                            | Preferred stock, par value $.01; 10,000,000 shares
authorized; no shares issued and outstanding                                                             |                                            |           |             |            |  |           |            |           
|                                            | Common stock, par value $.01; 50,000,000 shares
authorized; shares issued and outstanding:
25,683,589 at December 31, 2002 and 25,761,969
at March 31, 2003 |                                            |           | 256,836      |            |  |           | 257,622     |           
|                                            | Additional paid-in capital                                                                                                                                  |                                            |           | 82,743,658   |            |  |           | 82,793,811  |           
|                                            | Accumulated deficit                                                                                                                                         |                                            |           | (74,219,669  | )          |  |           | (75,094,097 | )         
|                                            |                                                                                                                                                             |                                            |           |              |            | 
|                                            |                                                                                                                                                             | Total stockholders equity                 |           |              | 8,780,825  |  |           |             | 7,957,336  | 
|                                            |                                                                                                                                                             |                                            |           |              |            | 
|                                            |                                                                                                                                                             | Total liabilities and stockholders equity |           | $            | 15,056,166 |  |           | $           | 13,748,220 | 
|                                            |                                                                                                                                                             |                                            |           |              |            | 

See accompanying notes to financial statements.

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Epoch Biosciences, Inc.
Statements of Operations
(unaudited)

|                                                                         |                                     |                          |            |                    |            |   |            |           |           |  
|------------------------------------------------------------------------ | ----------------------------------- | ------------------------ | ---------- | ------------------ | ---------- | - | ---------- | --------- | --------- | -
|                                                                         |                                     |                          |            | Three Months Ended |           
|                                                                         |                                     |                          |            | March 31,          |           
|                                                                         |                                     |                          |            |                    |           
|                                                                         |                                     |                          |            | 2002               |            |   | 2003       |          
|                                                                         |                                     |                          |            |                    |            |   |            |          
|Revenue:                                                                 |                                     |                          |            |                    |            |   |            |          
|                                                                         | Product sales                       |                          | $          | 1,524,194          |            |   | $          | 748,429   |          
|                                                                         | License fees and royalty income     |                          |            | 177,089            |            |   |            | 1,318,069 |          
|                                                                         | Contract research revenue           |                          |            | 580,673            |            |   |            | 349,000   |          
|                                                                         |                                     |                          |            |                    |            |  
|                                                                         |                                     | Total revenue            |            |                    | 2,281,956  |   |            |           | 2,415,498 |  
|Operating expenses:                                                      |                                     |                          |            |                    |            |   |            |          
|                                                                         | Cost of product sales               |                          |            | 1,099,365          |            |   |            | 739,737   |          
|                                                                         | Research and development            |                          |            | 1,066,938          |            |   |            | 1,257,207 |          
|                                                                         | Selling, general and administrative |                          |            | 1,369,817          |            |   |            | 1,300,130 |          
|                                                                         |                                     |                          |            |                    |            |  
|                                                                         |                                     | Total operating expenses |            |                    | 3,536,120  |   |            |           | 3,297,074 |  
|                                                                         |                                     | Operating loss           |            |                    | (1,254,164 | ) |            |           | (881,576  | )
|                                                                         | Interest income, net                |                          |            | 37,412             |            |   |            | 7,148     |          
|                                                                         |                                     |                          |            |                    |            |  
|                                                                         |                                     | Net loss                 |            | $                  | (1,216,752 | ) |            | $         | (874,428  | )
|                                                                         |                                     |                          |            |                    |            |  
|Net loss per share  basic and diluted                                   |                                     | $                        | (0.05      | )                  |            | $ | (0.03      | )        
|                                                                         |                                     |                          |            |                    |            |  
|Weighted average number of common shares
outstanding  basic and diluted |                                     |                          | 25,653,520 |                    |            |   | 25,729,582 |          

See accompanying notes to financial statements.

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Epoch Biosciences, Inc.
Statements of Cash Flows
(unaudited)

|                                      |                                                                             |                                                |                                   |                                                     |          |                              |            |           |          |          |          |  
|------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------- | --------------------------------- | --------------------------------------------------- | -------- | ---------------------------- | ---------- | --------- | -------- | -------- | -------- | -
|                                      |                                                                             |                                                |                                   |                                                     |          | Three Months Ended March 31, |           
|                                      |                                                                             |                                                |                                   |                                                     |          |                              |           
|                                      |                                                                             |                                                |                                   |                                                     |          | 2002                         |            |           | 2003     |         
|                                      |                                                                             |                                                |                                   |                                                     |          |                              |            |           |          |         
|Cash flows from operating activities: |                                                                             |                                                |                                   |                                                     |          |                              |            |          
|                                      | Net loss                                                                    |                                                | $                                 | (1,216,752                                          | )        |                              | $          | (874,428  | )       
|                                      | Adjustments to reconcile net loss to net
cash used in operating activities: |                                                |                                   |                                                     |          |                              |            |           |         
|                                      |                                                                             | Depreciation and amortization:                 |                                   |                                                     |          |                              |            |           |          |         
|                                      |                                                                             |                                                | Property and equipment            |                                                     |          | 200,188                      |            |           |          | 238,454  |         
|                                      |                                                                             |                                                | Intangible assets                 |                                                     |          | 73,874                       |            |           |          | 73,875   |         
|                                      |                                                                             | Issuance of common stock warrants for services |                                   |                                                     | 9,648    |                              |            |           | 578      |         
|                                      |                                                                             | Interest accrued on restricted cash            |                                   |                                                     | (10,721  | )                            |            |           | (9,612   | )       
|                                      |                                                                             | Deferred revenue                               |                                   |                                                     | (380,010 | )                            |            |           | (135,031 | )       
|                                      |                                                                             | Deferred rent                                  |                                   |                                                     | 26,396   |                              |            |           | 21,135   |         
|                                      |                                                                             | Changes in operating assets and liabilities:   |                                   |                                                     |          |                              |            |           |          |         
|                                      |                                                                             |                                                | Accounts receivable               |                                                     |          | (160,558                     | )          |           |          | 600,036  |         
|                                      |                                                                             |                                                | Inventory                         |                                                     |          | (54,239                      | )          |           |          | 106,722  |         
|                                      |                                                                             |                                                | Prepaid expenses and other assets |                                                     |          | (27,463                      | )          |           |          | 118,104  |         
|                                      |                                                                             |                                                | Accounts payable                  |                                                     |          | 240,189                      |            |           |          | 99,842   |         
|                                      |                                                                             |                                                | Accrued liabilities               |                                                     |          | (257,060                     | )          |           |          | (476,933 | )       
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      |                                                                             |                                                |                                   | Net cash used in operating activities               |          |                              | (1,556,508 | )         |          |          | (237,258 | )
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      | Cash flows from investing activities:                                       |                                                |                                   |                                                     |          |                              |            |           |         
|                                      |                                                                             | Release of security deposit on facilities      |                                   |                                                     | 100,000  |                              |            |           |         |         
|                                      |                                                                             | Acquisition of property and equipment          |                                   |                                                     | (142,389 | )                            |            |           | (89,433  | )       
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      |                                                                             |                                                |                                   | Net cash used in investing activities               |          |                              | (42,389    | )         |          |          | (89,433  | )
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      | Cash flows from financing activities:                                       |                                                |                                   |                                                     |          |                              |            |           |         
|                                      |                                                                             | Repayment of long term obligations             |                                   |                                                     | (2,672   | )                            |            |           | (70,612  | )       
|                                      |                                                                             | Proceeds from bank loan                        |                                   |                                                     |         |                              |            |           | 77,142   |         
|                                      |                                                                             | Proceeds from exercise of stock options        |                                   |                                                     | 1,150    |                              |            |           | 50,361   |         
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      |                                                                             |                                                |                                   | Net cash provided by (used in) financing activities |          |                              | (1,522     | )         |          |          | 56,891   |  
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      | Net decrease in cash and cash equivalents                                   |                                                |                                   | (1,600,419                                          | )        |                              |            | (269,800  | )       
|                                      | Cash and cash equivalents at beginning of period                            |                                                |                                   | 7,489,399                                           |          |                              |            | 3,507,645 |         
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      | Cash and cash equivalents at end of period                                  |                                                | $                                 | 5,888,980                                           |          |                              | $          | 3,237,845 |         
|                                      |                                                                             |                                                |                                   |                                                     |          |                             
|                                      | Supplemental disclosure of cash flow information -
Interest payments        |                                                | $                                 | 513                                                 |          |                              | $          | 8,344     |         
|                                      |                                                                             |                                                |                                   |                                                     |          |                             

See accompanying notes to financial statements

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Epoch Biosciences, Inc.
Notes to Financial Statements
March 31, 2003
(unaudited)

1.   Summary of Significant Accounting Policies

(a)   Nature of Business

Epoch Biosciences, Inc. is a biotechnology company developing technologies
and products to help scientists around the world perform genetic research to
improve our lives and our environment. Genetic analysis has become a pervasive
activity in academic, biopharmaceutical, clinical, agricultural, veterinary and
forensic laboratories. Our technologies facilitate rapid, accurate and
cost-effective genetic analysis at the scale necessary to generate the massive
amounts of genetic information being studied today.

As the human genome and other animal and plant genomes are sequenced, the
task of understanding the structure and function of genes lies before us
(genomics). Researchers want to know when and why a gene switches on and
begins producing its protein (gene expression) and what the genes protein does
in the body (proteomics). Finally, researchers want to know what peoples
genetic differences mean for their health and susceptibility to disease. For
example, single nucleotide polymorphisms, or SNPs, are tiny differences in our
DNA that make humans different from one another. SNPs have been linked to
susceptibility to diseases, and to peoples response to medications.

Because of the implications of understanding gene function on human health
and disease, institutions have moved quickly to design and manufacture
automated genetic analysis systems. We develop patented technologies that
improve the output of these systems and that are compatible with many of the
genetic analysis systems currently in use or in development. Just as
microprocessors are found in essentially all electronic appliances, our
chemistries and technologies have the potential to be incorporated in nearly
all genetic analysis systems.

Out technologies are useful in genetic research, diagnostics, drug
development, infectious disease detection, prenatal testing, and population
screening to assess our risk of disease or to predict our response to drugs.
Epochs products also have application in forensics, food testing, and
environmental testing, including bio-warfare and bioterrorism.

(b)   Basis of Presentation

The unaudited financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required to be
presented for complete financial statements. The accompanying financial
statements include all adjustments (consisting only of normal recurring
accruals), which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. Certain 2002
balances have been reclassified to conform with the 2003 presentation.

The financial statements and related disclosures have been prepared with
the presumption that users of the interim financial information have read or
have access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes included in Epochs
2002 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission.

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(c)   Stock-Based Compensation

Epoch applies APB Opinion No. 25, Accounting for Stock Issued to Employees
and related interpretations in measuring compensation costs for its employee
stock option plans. We disclose proforma net loss and net loss per share as if
compensation cost had been determined consistent with Statement of Financial
Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation.
Stock options and warrants issued to non-employees are accounted for using the
fair value method prescribed by SFAS 123 and Emerging Issues Task Force 96-18.

Had we determined compensation cost based on the fair value of our stock
options on the grant date under SFAS 123, our net loss and net loss per share
would have been the pro forma amounts indicated below:

|                                        |                                                                                                   |  |                              |            |   |      |   |            |  
|--------------------------------------- | ------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                        |                                                                                                   |  | Three months ended March 31, |           
|                                        |                                                                                                   |  |                              |           
|                                        |                                                                                                   |  | 2002                         |            |   | 2003 |  
|                                        |                                                                                                   |  |                              |            |   |      |  
|Net loss:                               |                                                                                                   |  |                              |            |   |      |   |           
|                                        | As reported                                                                                       |  | $                            | (1,216,752 | ) |      | $ | (874,428   | )
|                                        | Add: Stock-based employee
compensation expense included in
reported net loss                      |  |                              |           |   |      |   |           |  
|                                        | Deduct: Stock-based employee
compensation determined under
fair value based method for all
awards |  |                              | (328,700   | ) |      |   | (235,466   | )
|                                        |                                                                                                   |  |                              |            |   |     
|                                        | Pro forma                                                                                         |  | $                            | (1,545,452 | ) |      | $ | (1,109,894 | )
|                                        |                                                                                                   |  |                              |            |   |     
|Net loss per share  basic and diluted: |                                                                                                   |  |                              |            |   |      |   |           
|                                        | As reported                                                                                       |  | $                            | (0.05      | ) |      | $ | (0.03      | )
|                                        |                                                                                                   |  |                              |            |   |     
|                                        | Pro forma                                                                                         |  | $                            | (0.06      | ) |      | $ | (0.04      | )
|                                        |                                                                                                   |  |                              |            |   |     

The per share weighted-average fair value of stock options granted during
the first quarter of 2002 was $2.15, on the grant date using the Black-Scholes
option pricing model with the assumptions below. No options were granted
during the first quarter of 2003.

|                        |  |                             |      |   |      |  |   | 
|----------------------- |  | --------------------------- | ---- | - | ---- |  | - | 
|                        |  | Three months ended March 31 |     
|                        |  |                             |     
|                        |  | 2002                        |      |   | 2003 | 
|                        |  |                             |      |   |      | 
|Expected dividend yield |  |                             | 0.0  | % |      |  |  | 
|Risk-free interest rate |  |                             | 3.78 | % |      |  |  | 
|Expected volatility     |  |                             | 128  | % |      |  |  | 
|Expected life in years  |  |                             | 5    |   |      |  |  | 

(d)   Loss Per Share

Basic loss per share is computed based on weighted average shares
outstanding during the reporting period and excludes any potential dilution.
Diluted per share amounts reflect potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock. Our capital structure includes common stock options and common
stock warrants, all of which have been excluded from net loss per share
calculations as they are antidilutive, as follows:

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|                     |  |              |           |  |      |  |           | 
|-------------------- |  | ------------ | --------- |  | ---- |  | --------- | 
|                     |  | At March 31, |          
|                     |  |              |          
|                     |  | 2002         |           |  | 2003 | 
|                     |  |              |           |  |      | 
|Outstanding options  |  |              | 2,555,998 |  |      |  | 2,557,484 | 
|Outstanding
warrants |  |              | 398,333   |  |      |  | 398,333   | 

(e)   Concentration of Credit Risk

Credit is extended based on an evaluation of a customers financial
condition and collateral is generally not required. The majority of revenues
are derived from private and public companies and public enterprises in the
research market in the United States.

The table below summarizes the revenue and approximate accounts receivable
of our customers where our risk is significantly concentrated.

|         |  |                     |    |   |                     |  |    |           |  |   |         |  |  |   |         | 
|-------- |  | ------------------- | -- | - | ------------------- |  | -- | --------- |  | - | ------- |  |  | - | ------- | 
|         |  | Percent of Revenues |    |   | Accounts Receivable | 
|         |  |                     |    |   |                     | 
|         |  | Three months ended  |    |   | December 31,        |  |    | March 31, | 
|Customer |  | March 31,           |    |   | 2002                |  |    | 2003      | 
|         |  |                     |    |   |                     |  |    |           | 
|         |  | 2002                |    |   | 2003                |  |    |           |  |   |         |  |  |  
|         |  |                     |    |   |                     |  |    |           |  |   |         |  |  |  
|A        |  |                     | 60 | % |                     |  | 47 | %         |  | $ | 875,000 |  |  | $ | 950,000 | 
|B        |  |                     | 0  | % |                     |  | 22 | %         |  |   | 795,000 |  |  |   | 10,000  | 
|C        |  |                     | 13 | % |                     |  | 0  | %         |  |   | 85,000  |  |  |   | 85,000  | 

(f)   Legal Proceedings

Mordecai Jofen, as Trustee of the Harbor Trust, f/k/a The Edward Blech
Trust v. Epoch Biosciences, Inc., United States District Court for the Southern
District of New York, Case No. 01 CV 4129.

The Harbor Trust (formerly the Edward Blech Trust) filed a complaint
against us, alleging the breach of a 1996 letter agreement between us and David
Blech. Pursuant to the letter agreement, upon payment of a pre-existing debt
owed to us by Blech (the Ribonetics Debt), we were to release to Blech from
escrow warrants to purchase 500,000 shares of our stock. Blech assigned all of
his rights under the letter agreement to the Harbor Trust. The Harbor Trusts
claim is based on our alleged failure to timely register the common stock
underlying the warrants, allegedly resulting in damages to Blech and/or the
Harbor Trust of at least $10 million, based on the peak trading value of our
stock.

We filed a motion to dismiss the complaint based on, among other things,
the positions that: (1) Blech and the Harbor Trust have never had rights to
receive or exercise the warrants because Blech failed to perform a condition
precedent, i.e., payment of the Ribonetics Debt; and (2) we had no obligation
to register the stock unless and until Blech was entitled to the warrants.
Further, the warrants expired pursuant to the letter agreement in June 2000.
The Court granted our motion to dismiss in November 2001, but gave the Harbor
Trust leave to file an amended complaint, which they filed in December 2001.
We filed a motion to dismiss the amended complaint in January 2002. In July
2002, the Court decided in our favor and granted the motion to dismiss without
leave to file an amended complaint.

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In August 2002 the Harbor Trust appealed the Courts dismissal of its case
to the United States Court of Appeal for the Second Circuit. The appeal was
argued on May 5, 2003 and is likely to be
resolved in the second or third quarter of 2003. While we believe we have
a strong position, it is not possible at this time to state the likelihood of
an unfavorable outcome because of the inherent uncertainties of litigation.




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

This Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
That Act provides a safe harbor for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward-looking and provide meaningful, cautionary
statements identifying important factors that could cause actual results to
differ from the projected results.

Other than statements of historical fact, all statements in this Quarterly
Report on Form 10-Q and, in particular, any projections of or statements as to
our expectations or beliefs concerning our future financial performance or
financial position or as to future trends in our business or in our markets,
are forward-looking statements. Forward-looking statements reflect our current
expectations and are inherently uncertain and our actual results in future
periods may differ materially from our expectations concerning our projections
of those results or of future business trends described in this Quarterly
Report on Form 10-Q. The sections below entitled Certain Factors that May
Affect Our Business and Future Results under Item 2, Managements Discussion
and Analysis of Financial Condition and Results of Operations, describe some,
but not all, of the factors, risks and uncertainties that could cause these
differences, including but not limited to the possibility that potential
products utilizing the Companys technology may be ineffective or, although
effective, may be uneconomical to market; that third parties hold proprietary
rights that preclude Epoch or its licensees from marketing its products; or
that third parties may market superior products. Readers of this Quarterly
Report on Form 10-Q are urged to read those sections in their entirety. In
light of the significant uncertainties inherent in the forward-looking
information included in this document, the inclusion of information should not
be regarded as a representation by us or any other person that our objectives
or plans will be achieved. The forward-looking statements contained in this
Quarterly Report on Form 10-Q are made only as of the date of this Quarterly
Report on Form 10-Q and Epoch undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise.

The following discussion of Epochs financial condition and results of
operations should be read in conjunction with the financial statements and the
related notes thereto included elsewhere in this Quarterly Report on Form 10-Q
and other documents Epoch files from time to time with the Securities and
Exchange Commission, including subsequent Current Reports on Form 8-K,
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Results of Operations

Overview

Epoch develops technology and products that enable and accelerate genomic
analysis. The foundation of our business strategy is the continued funding of
innovative research and development and commercialization of the resultant
products through a number of channels.

We earn revenues through a variety of sources. We license our technology
for incorporation into other companies products and generate product revenue
and earn license fees and royalties from those companies. We also sell our
products to end-users; both through our direct sales force and through

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distributors that provide worldwide reach. We also earn revenues through
contract research activities, whereby third parties pay for specific research
and development activities carried out by our scientists, and through research
grants.

We expect to incur operating losses for at least the current fiscal year
as we continue research and development spending in applying our synthetic
DNA-based technology to genomic analysis to the research and other fields, and
incur costs commercializing the resultant products through various channels.

Critical Accounting Policies

Our accounting policies are more fully described in Note 1 to our annual
financial statements for the year ended December 31, 2002. Our critical
accounting policy is revenue recognition. In applying this policy, our
management uses its judgment to determine the appropriate assumptions to be
used in the determination of the estimates. Those estimates are based on our
historical experience, terms of existing contracts, our observance of trends in
the industry, information provided by our customers and information available
from other outside sources, as appropriate.

Revenue recognition. We earn revenues from product sales of chemical
products and reagents to manufacturers for incorporation into their products,
from the sale of specialty oligonucleotides and value added reagents to end
users and distributors in the research fields of genomics and molecular
diagnostics, from license fees for the use of our proprietary technology and
know-how, and by providing services to third parties for performing research
and development on their behalf. We also have product royalty agreements that
result in royalties to us upon ultimate sales of products by our partners.



| |  |  | Revenues from product sales that require no ongoing
obligations are recognized when shipped to the customer and title
has passed. To the extent that sales are made to end distributors
and not sold through to end users our future sales could decline.                                                                                                                                                                                               
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | License fees are recognized over the term of the agreement to
which the license fees correspond, which may extend to the
expiration of the underlying patents, and based on the terms and
future performance obligations in the underlying agreements. These
up front fees are generally nonrefundable regardless of future
performance. Deferred revenue principally represents license fees
received in advance and prepayments for product purchases.
|
| |  |  | Contract research revenues are recognized as research and
development activities are performed under the terms of commercial
collaboration and supply agreements and government grants. Direct
costs related to these contracts and grants are reported as research
and development expenses.                                                                                                                                                           
|
| |  |  | Royalty revenues are recognized when earned under the terms
of the related agreements, which is generally upon sale of products
by our partner containing our component products. To the extent our
partners no longer use our component products or sales of their
products are less than expected, our royalty revenues could decrease
in the future.                                                                                                 

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Revenues

Revenues for the quarter ended March 31, 2003, increased 6% over the
comparable period of 2002 to $2,415,000 primarily due to a significant increase
in royalties offset by reductions in product sales and contract research
revenue.

Product Sales. Product sales include sales of specialty oligonucleotides
to end users and distribution partners in the research market and sales of
chemical intermediates and dyes, quencher, and modified bases to collaborative
partners and distributors. Product sales decreased 51% to $748,000 in the
first quarter of 2003 from $1,524,000 in the comparable period of 2002, due to
a decrease in revenues from Applied Biosystems for MGB TaqMan probe
manufacturing, a decrease in the sales of non-proprietary specialty
oligonucleotides, and a decrease in revenues from the sale of chemical
intermediates.

Product sales recognized from manufacturing rights for Applied Biosystems
MGB TaqMan probes ceased in September 2002, and the value of those
manufacturing rights was recharacterized as product royalties in accordance
with the most recent amendment to that agreement. Accordingly, product sales
decreased and royalty income increased when comparing the current quarter and
the first quarter of 2002. The 23% reduction in sales of our non-proprietary
specialty oligonucleotides in the current quarter reflects a general reduction
of sales and marketing resources directed towards the non-proprietary
oligonucleotide product line.

Chemical intermediate revenues represent component chemistries that we
supply on cost-plus terms for incorporation in our partners products and sales
of dyes, quencher, and modified bases through distributors. These revenues
decreased 70% in the first quarter of 2003 from the comparable quarter of 2002
as a result of reduced shipments to Applied Biosystems. In early 2002 Applied
Biosystems was actively building an initial inventory of finished goods as well
as inventory of component materials in support of their Assays-on-Demand and
Assays-by-Design product launches. The inventory levels have been
established, the products launched, and shipments to Applied Biosystems in
early 2003 were lower than in 2002, as expected.

License Fees and Royalty Income. License fees reflect the amortization of
initial payments for technology and know-how transfers. These amounts are
amortized over the life of the contract. Royalty income represents amounts due
under license agreements for sales of other companies products that include our
technologies and/or for contractual minimum amounts. License fees and royalty
income increased to $1,318,000 in 2003 from $177,000 in the comparable period
of 2002 as the result of higher contractual minimums from Applied Biosystems
and to a lesser extent license and technology access fees from new
collaborations with QIAGEN and Amersham Biosciences. The increased contractual
minimums arise from the latest amended agreement with Applied Biosystems that,
among other things, provides for quarterly rather than annual minimum
royalties.

Contract Research Revenue. Contract research revenue primarily reflects
payments for contract research and development performed for our corporate
partners. Contract research revenues decreased from $581,000 in 2002 to
$349,000 in 2003 primarily due to completion of the Applied Biosystems research
contract in August 2002 and suspension of contract research payments by Third
Wave Technologies.

In October 2000, we entered into a Development, License and Supply
Agreement with Third Wave Technologies whereby we licensed our proprietary
fluorescent dye and quencher technologies to

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Third Wave. Third Wave also has the option to license other proprietary
chemistries we have, in which case additional license and royalty fees would be
due to us. We received an initial license fee that is being amortized over the
life of the contract and we receive royalties on sales of Third Wave products
which include the licensed technology. Included in the agreement with Third
Wave was a collaborative research effort to be funded by Third Wave through
December 31, 2003, subject to joint approval of annual research plans. In May
2002, Third Wave informed us that it was ceasing funding development activities
with us. We instituted arbitration proceedings against Third Wave and in March
2003 held a mediation hearing with Third Wave at which the parties agreed to
the terms of a settlement. The settlement provides that Third Wave would no
longer be obligated to fund research activities. In exchange, Third Wave
agreed to pay us $300,000 in two equal installations in May and July 2003, of
which $85,000 had been accrued in 2002 and was included in accounts receivable
at March 31, 2003. Third Wave also agreed to annual minimum royalties under its
license from us for dye and quencher technologies through 2006, subject to
amended license termination provisions. The impact of the settlement was not
recognized in the March 31, 2003 financial statements, pending finalization of
the agreement.

Operating Expenses

Cost of Product Sales. The cost of product sales represents the costs of
material, labor and overhead allocations associated with product sales. Also
included is the cost of outside manufacturers which we use to produce some of
our chemical intermediates. The cost of product sales decreased to $740,000 in
the first quarter of 2003 compared to $1,099,000 in the comparable period of
the prior year. Costs as a percentage of product sales increased from 72% in
the first quarter of 2002 to 99% in the first quarter of the current year.

Generally, decreases in costs of product sales are tied to the decreases
in revenues, while the changes in costs as a percentage of product sales are
generally impacted by the product mix and economies of scale resulting from
changes in volume. The selling prices of our chemical intermediates, for
example, are determined by contracts and are tied to fully burdened
manufacturing costs, which means our gross margin is fixed at levels below
those generally found in the commercial marketplace.

The increase in costs as a percentage of product sales experienced in the
first quarter of 2003 is primarily the result of the loss of economies of scale
driven by the decrease in product sales. Many of the costs of our
non-proprietary specialty oligonucleotide manufacturing operations in San Diego
are fixed within a wide range of capacity output. As a result, significant
changes in volume like we experienced in the first quarter of 2003 have a less
than expected impact on costs and can have a significant impact on our costs as
a percentage of product sales. While we reduced our manufacturing staff early
in the quarter, we retained the core staff competencies and all of the
equipment that resulted in very poor gross margins on our non-proprietary
specialty oligonucleotide sales. The costs of our manufacturing group were
also impacted by severance payments associated with the staff reduction.
Additionally we had a significantly different product mix, specifically lower
product revenues from Applied Biosystems for MGB TaqMan manufacturing rights
due to a reclassification of those product revenues as royalties.

Research and Development. Research and development costs of $1,257,000
increased $190,000, or 18%, in the first quarter of 2003 compared to the
comparable period of 2002. Significant changes in research and development
costs were:



| |  |  | Lower utilization of our research and development personnel
in manufacturing. The use of research and development personnel in
manufacturing was $355,000 lower in the first
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | quarter of 2003 compared to the comparable quarter of 2002, causing an
increase in reported R&D costs. The use of research and development
personnel in manufacturing will fluctuate depending on the time and
availability of personnel to conduct such activities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Reduced payroll expenses of $175,000 as the result of fewer
personnel in the first quarter of 2003 compared to the comparable
period of 2002 as we continue to focus on controlling costs.                                                                          

Selling, General and Administrative. Selling, general and administrative
expenses of $1,300,000 decreased $70,000, or 5%, in the first quarter of 2003
compared to the comparable period of 2002. The decrease in 2003 was primarily
the result of:



| |  |  | A decrease of selling and marketing expenses of $246,000, or
64%, in the first quarter of 2003 compared to the comparable quarter
of 2002 primarily as a result of reduced expenditures on print
advertising.                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Arbitration expenses incurred in connection with the dispute
with Third Wave Technologies concerning their suspension of contract
research payments amounted to $146,000 in the first quarter of 2003.
There were no comparable expenses in the first quarter of 2002.

Interest Income, net. Interest income, net, in the first quarter of 2003
was lower than the comparable period of 2002 due to reduced cash balances
available for investment, lower interest rates, and higher interest expense as
a result of our new term loans to Silicon Valley Bank in late 2002.

Liquidity and Capital Resources

Cash and cash equivalents amounted to $3,238,000 at March 31, 2003, a
$270,000 decrease from December 31, 2002 balances.

Cash used in operations during the three month period ended March 31, 2003
amounted to $237,000 primarily as a result of our net loss of $874,000 adjusted
for certain non-cash reconciling items and fluctuations in working capital
accounts. The most significant changes in working capital accounts that
impacted cash used in operations were decreases in accounts receivable of
$600,000 and inventories of $107,000 reflecting our decreased product sales,
offset by a net decrease in accounts payable and accrued liabilities of
$377,000, due primarily to payment of 2002 incentive compensation amounts.
Changes in deferred revenue, representing up front license payments subject to
recognition over the terms of the underlying agreements and prepayments for
royalties and product purchases, also impacts cash flow from operations.
Approximately $135,000 in product sales and royalties recognized during the
three months ended March 31, 2003 had been received in advance and recorded as
deferred revenue and therefore didnt generate cash in the current period.
During the comparable three-month period of 2002, $380,000 in product sales and
royalties which were recognized in revenue had been previously received in
advance. The amounts and timing of these offsets are based on contracts with
our partners.

Cash used in investing activities of $89,000 in the three months ended
March 31, 2003 was for the acquisition of computers and software to upgrade
information systems capabilities. Future capital expenditures will likely
include increased manufacturing capacity for our Bothell facility and other
investments to support our operational growth. We may also require a larger
inventory of raw materials and products to provide better service to our
customers. We may finance these purchases from our cash and cash equivalents
on hand, cash generated from our operations, borrowings, equity offerings, or a
combination thereof.

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Cash provided by financing activities in the period was $57,000, the
result of $77,000 in
proceeds from the new term loan, and $50,000 received from the exercise of
stock options, offset by repayments on term loans of $71,000.

As of March 31, 2003, we have $1,576,000 of available financing under our
term loan that may be drawn through June 2003, and $750,000 available from a
working capital line of credit which may be used through August 2004. We have
had preliminary discussions with the commercial lender about renewal of the
term loan facility that expires in June 2003. There can be no assurance that
such discussion will lead to a renewal of that facility on acceptable terms, or
at all.

We anticipate that existing cash balances, projected cash from operations
and unused borrowing capacity under existing bank loans, will be sufficient to
meet our anticipated working capital and capital expenditure needs through at
least the next 12 months. However, it is possible that we may need to raise
additional capital to fund our activities, to maintain our listing on Nasdaq,
and/or to consummate acquisitions of other businesses, products or
technologies. We may be able to raise such funds by selling more stock to the
public or to selected investors, or by borrowing money. In addition, even
though we may not need additional funds, we may still elect to sell additional
equity securities or obtain credit facilities for other reasons. We may not be
able to obtain additional funds on terms that would be favorable to our
shareholders and us, or at all. If we raise additional funds by issuing
additional equity or convertible debt securities, the ownership percentages of
existing shareholders would be reduced. In addition, the equity or debt
securities that we issue may have rights, preferences or privileges senior to
those of the holders of our common stock.

Certain Factors That May Affect Our Business And Future Results

Forward Looking Statements

Some of the information included herein contains forward-looking
statements. These statements can be identified by the use of forward-looking
terms such as may, will, expect, anticipates, estimate, continue,
or other similar words. These statements discuss future expectations,
projections or results of operations or of financial condition or state other
forward-looking information. When considering these forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements we make. These risk factors could cause our actual results to
differ materially from those contained in any forward-looking statement. If
any of the following risks actually occur, our business could be harmed and the
trading price of our common stock could decline.

We may be unable to maintain our listing on Nasdaq, which could cause our stock price to fall materially and decrease the liquidity of our common stock

Our common stock is currently listed on The Nasdaq SmallCap Market. To
maintain the listing, we must continue to satisfy the ongoing Nasdaq compliance
requirements, including that our common stock have a minimum bid price of $1.00
per share. In the third and fourth quarters of 2002 our stock traded below the
$1 minimum for a few days.

If our common stock is delisted from trading on The Nasdaq SmallCap Market
and is not relisted thereon we would likely seek listing of our common stock on
the over-the-counter market, which is viewed by many investors as a less liquid
marketplace. As a result, the price per share of our common stock would likely
decrease materially and, the trading market for our common stock, our ability
to issue additional securities and our ability to secure additional financing
would likely be materially and adversely affected.

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We have been profitable in only one quarter and anticipate future losses, and we may require additional capital

Since our formation in 1985, we have generated limited revenues and only
realized one profitable quarter, which was the quarter ended December 31, 2002.
As of March 31, 2003, we had an accumulated deficit of approximately $75
million. While we are commercializing our products and technologies, and prior
to adequate revenues being generated from these activities, we expect to incur
additional losses as we expand our manufacturing capacity, continue our
research and development activities and fund our product commercialization
efforts. There is no assurance that we will ever become profitable or that we
will sustain profitability if we do become profitable. Should we experience
continued or unforeseen operating losses, our capital requirements would
increase and our stock price would likely decline.

Additionally, as of March 31, 2003 we had approximately $3.2 million in
cash and cash equivalents and have a commitment from a bank for a secured term
loan of $2,500,000 of which $924,000 has been drawn, and also a working capital
line of credit of $750,000 that has not been drawn upon. We can draw on the
equipment loan through June 2003 and on the working capital line of credit
through August 2004. We currently anticipate that our current cash balances,
cash from operations, and unused borrowing capacity will be sufficient to meet
our cash needs through at least the next twelve months. However, we may need
to seek additional equity and/or debt capital, and there can be no assurance
that such capital will be available to us on favorable terms, or at all. If
additional funds are not available, we would be required to delay, reduce, or
eliminate expenditures for some or all of our programs or products.

There is a risk that our technology may not be effective or might not work

The science and technology of synthetic DNA-based products is rapidly
evolving. While we have begun to produce and supply products to customers for
commercial use, the majority of our products and proposed products are in the
discovery or early development stage. These proposed products will require
significant further research, development, and testing. We face the risk that
any or all of our products and proposed products could prove to be ineffective
or unsafe, or be an inferior product to products marketed by others because our
products are based on new and unproven innovative technologies. Some of our
current research and development activities may not result in any commercially
viable products. If we do not have commercially viable products, we will not
be able to sell our products, we will not be able to attract partners, and we
will not be able to generate funds internally to support operations.

We have limited manufacturing experience

While we have experience in researching and developing unique, proprietary
technologies to enhance the study of genes, and in manufacturing
oligonucleotides at relatively small scales, our experience in manufacturing
other chemical reagent products is relatively limited. We have sufficient
manufacturing capacity to meet current customer needs. Anticipated increases
in customer demand over the next year may require us to expand our
manufacturing capacity in Bothell, acquire additional manufacturing capacity,
or utilize costly third-party manufacturing vendors, as necessary. Any delay
or inability to expand our manufacturing capacity could materially adversely
affect our manufacturing ability.

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There is a risk that we do not own exclusive rights to our technology, or that
our competition may have access to our technology which may prevent us from selling our products

We attempt to protect our proprietary technology by relying on several
methods, including United States patents. We also have international patent
applications that correspond to many of the U.S. patents and patent
applications. The issued patents and pending patent applications cover
inventions relating to the components of our core technologies. The expiration
dates of these patents range from January 2010 to July 2020. We make no
guarantee that any issued patents will provide us with significant proprietary
protection, that pending patents will be issued, or that products incorporating
the technology covered by our issued patents or pending applications will be
free from challenges by competitors. Further, third parties may hold
proprietary rights which precede our claims and could therefore prohibit us
from marketing the proposed products.

Some of our technology might infringe on the rights of others, which may prevent us from selling our products

There is a great deal of litigation regarding patents and other
intellectual property rights in the biomedical industry. We were defendants in
one action of this kind, which we settled prior to 1997. Although patent and
intellectual property disputes in the biomedical area are sometimes settled
through licensing or similar arrangements, this kind of solution can be
expensive, if a license can be obtained at all. An adverse determination in a
judicial or administrative proceeding or our failure to obtain necessary
licenses could prevent us from manufacturing and selling our products. This
would substantially hurt our business.

We face numerous competitors and changing technologies which could make our products obsolete

Many companies do research and development and market products designed to
analyze genes and diagnose conditions based on a number of technologies and are
developing additional products. Many of these companies have substantially
greater capital resources, larger research and development and marketing staffs
and facilities and greater experience in developing products than we have.
Furthermore, the specific field in which we operate is subject to significant
and rapid technological change. Even if we successfully introduce our products
or proposed products, our technologies could be replaced by new technologies or
our products or proposed products might be obsolete or non-competitive.

We will be dependent upon our agreement with Applied Biosystems for a
significant portion of our revenues for 2003, and a reduction of sales under or
early termination of this agreement would seriously harm our revenues and
operating results and would likely cause our stock price to decline

In January 1999, Epoch and Applied Biosystems entered into a License and
Supply Agreement pursuant to which we licensed some of our technology to
Applied Biosystems for use in its TaqMan® 5-nuclease real-time PCR research
assays (TaqMan® is a registered trademark of Roche Molecular Systems, Inc.).
In July 1999, we licensed our proprietary software, which speeds the design of
oligonucleotide probes used in the study of genes, to Applied Biosystems. In
August 2000, the agreement was amended to, among other things, provide for
Epoch manufacturing product for Applied Biosystems. In July 2002 this
agreement was further amended to remove the manufacturing rights from the
contract effective October 2002, redefine product categories, increase the
minimum royalties and royalty rates, and establish that minimum royalties are
measured and paid quarterly. We will depend

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upon product sales and royalties from Applied Biosystems sales of its
TaqMan® assays under this agreement for a significant portion of our revenues
in 2003 and future periods.

Either party may terminate the agreement upon 180 days written notice. In
the event that this agreement is terminated, our revenues, financial condition
and operating results would be adversely affected and our stock price would
likely decline.

We will be dependent on our agreements with Amersham Biosciences and QIAGEN
N.V. for the distribution of our MGB Eclipse products and the resultant
revenues. Lower than expected sales, or early termination of these agreements
would seriously harm our projected revenues and operating results and would
likely cause our stock price to decline.

In July 2002, Epoch and Amersham Biosciences entered into an agreement
under which Amersham became the exclusive worldwide sales, marketing and
distribution partner to the research field of our MGB Eclipse Probe Systems for
SNPs, and the co-exclusive worldwide sales and marketing partner to the
research field for gene expression.

In October 2002, Epoch and QIAGEN entered into a license and supply
agreement under which QIAGEN became the co-exclusive worldwide sales, marketing
and distribution partner to the research field of our MGB Eclipse Probe Systems
for gene expression.

We will depend upon product sales to Amersham and QIAGEN under these
agreements for a significant portion of our revenues in future periods. In the
event that either of these agreements is terminated, or either partner is
unsuccessful at commercializing our technologies, our revenues, financial
condition and operating results would be adversely affected and our stock price
would likely decline.

Some of our customers may experience financial difficulties, which could
adversely impact our collection of accounts receivable

Although historically we have experienced limited credit losses from our
trade receivables, our experience is limited. At March 31, 2003, our allowance
for doubtful accounts was $36,000. We regularly review the collectibility and
credit worthiness of our customers and the receivables to determine an
appropriate allowance for doubtful accounts, however future uncollectible
accounts could exceed our current or future allowances.

The loss of key personnel could adversely affect operations by impairing our
research and our efforts to commercialize and license our products

Our performance is greatly dependent upon our key management, including
our Chief Executive Officer, Dr. William Gerber, and technical personnel and
consultants. Our future success will depend in part upon our ability to retain
these people and to recruit additional qualified personnel. We must compete
with other companies, universities, research entities and other organizations
in order to attract and retain highly qualified personnel. Although we have
entered into agreements with our key executive officers, we make no guarantee
that we will retain these highly qualified personnel or hire additional
qualified personnel. We currently maintain no key man life insurance on any of
our management or technical personnel.

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The value of our common stock could change significantly in a very short time

The market price of our common stock may fluctuate significantly. For
example, in 2002 our stock traded as high as $2.72 in January, and as low as
$0.70 in October. The rapid price changes Epoch has experienced recently, and
throughout our history, place your investment in our common stock at risk of
total loss over a short period of time. We are in the biotechnology industry
and the market price of securities of biotechnology companies have fluctuated
significantly and these fluctuations have often been unrelated to the
companies operating performance. Announcements by us or our competitors
concerning technological innovations, new products, proposed governmental
regulations or actions, developments or disputes relating to patents or
proprietary rights, and other factors that affect the market generally could
significantly impact our business and the market price of our securities.

Public opinion regarding ethical issues surrounding the use of genetic
information may adversely affect demand for our products

Public opinion regarding ethical issues related to the confidentiality and
appropriate use of genetic testing results may influence governmental
authorities to call for limits on, or regulation of the use of, genetic
testing. In addition, these authorities could prohibit testing for genetic
predisposition to certain conditions, particularly for those that have no known
cure. Furthermore, adverse publicity of public opinion relating to genetic
research and testing, even in the absence of any governmental regulation, could
harm our business. Any of these scenarios could reduce the potential markets
for our products and technologies, which could materially and adversely affect
our revenues.

Government regulation of genetic research or testing may adversely affect the
demand for our products and impair our business and operations

Federal, state and local governments may adopt regulations relating to the
conduct of genetic research and genetic testing. These regulations could limit
or restrict genetic research activities as well as genetic testing for research
or clinical purposes. In addition, if state and local regulations are adopted,
these regulations may be inconsistent with, or in conflict with, regulations
adopted by other state or local governments. Regulations relating to genetic
research activities could adversely affect our ability to conduct our research
and development activities. Regulations restricting genetic testing could
adversely affect our ability to market and sell our products and our
technologies. Accordingly, any regulations of this nature could harm our
business.

Health care cost containment initiatives could limit the adoption of genetic
testing as a clinical tool, which would harm our revenues and prospects

In recent years, health care payers as well as federal and state
governments have focused on containing or reducing health care costs. We
cannot predict the effect that any of these initiatives may have on our
business, and it is possible that they will adversely affect our business. In
particular, gene-based therapeutics, if successfully developed and
commercialized, are likely to be costly compared to currently available drug
therapies. Health care cost containment initiatives focused either on
gene-based therapeutics or on genetic testing could cause the growth in the
clinical market for genetic testing to be curtailed or slowed. In addition,
health care cost containment initiatives could also cause pharmaceutical
companies to reduce research and development spending. In either case, our
business and our operating results would be harmed.

18



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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments include cash and short-term investment grade
debt securities. We also have term loans on capital equipment through a
commercial bank. At December 31, 2002 and March 31, 2003 the carrying values
of our financial instruments approximated their fair values based on current
market prices and rates. We do not believe that fluctuations in the interest
rates would have a material impact on us. It is our policy not to enter into
derivative financial instruments. We do not currently have material foreign
currency exposure as our international transactions are minimal and the
majority of our international transactions are denominated in U.S. currency.
Accordingly, we do not have significant exposure to foreign currency exchange
rate risk at March 31, 2003. In the future, under the terms of the QIAGEN
agreement, we will be conducting some of our business in Euros for QIAGEN sales
in Europe and in Yen for QIAGEN sales in Japan. We do not anticipate that
these transactions will create significant exposure to foreign currency
exchange rate risk.




Item 4.     Controls and Procedures

Evaluation of disclosure controls and procedures

The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Companys reports
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms, and that such information is accumulated and communicated to the
Companys management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

Within 90 days prior to the date of this report, the Company carried out
an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Companys disclosure controls
and procedures pursuant to Rule 13a14(c) under the Securities Exchange Act of
1934, as amended. Based on that evaluation, the Companys Chief Executive
Officer and Chief Financial Officer have concluded that as of the date of the
evaluation, the Companys disclosure controls and procedures were adequate to
timely alert them of material information relating to the Company required to
be included in the Companys periodic SEC filings.

Changes in internal controls

There were no significant changes in the Companys internal controls, or
to the Companys knowledge, in other factors that could significantly affect
the Companys disclosure controls and procedures subsequent to the date of our
most recent evaluation.

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##### Table of Contents






Part II. Other Information




Item 1.   Legal Proceedings

Mordecai Jofen, as Trustee of the Harbor Trust, f/k/a The Edward Blech
Trust v. Epoch Biosciences, Inc., United States District Court for the Southern
District of New York, Case No. 01 CV 4129

The Harbor Trust (formerly the Edward Blech Trust) filed a complaint
against us, alleging the breach of a 1996 letter agreement between us and David
Blech. Pursuant to the letter agreement, upon payment of a pre-existing debt
owed to us by Blech (the Ribonetics Debt), we were to release to Blech from
escrow warrants to purchase 500,000 shares of our stock. Blech assigned all of
his rights under the letter agreement to the Harbor Trust. The Harbor Trusts
claim is based on our alleged failure to timely register the common stock
underlying the warrants, allegedly resulting in damages to Blech and/or the
Harbor Trust of at least $10 million, based on the peak trading value of our
stock.

We filed a motion to dismiss the complaint based on, among other things,
the positions that: (1) Blech and the Harbor Trust have never had rights to
receive or exercise the warrants because Blech failed to perform a condition
precedent, i.e., payment of the Ribonetics Debt; and (2) we had no obligation
to register the stock unless and until Blech was entitled to the warrants.
Further, the warrants expired pursuant to the letter agreement in June 2000.
The Court granted our motion to dismiss in November 2001, but gave the Harbor
Trust leave to file an amended complaint, which they filed in December 2001.
We filed a motion to dismiss the amended complaint in January 2002. In July
2002, the Court decided in our favor and granted the motion to dismiss without
leave to file an amended complaint.

In August 2002 the Harbor Trust appealed the Courts dismissal of its case
to the United States Court of Appeal for the Second Circuit. The appeal was
argued on May 5, 2003 and is likely to be resolved in the second or third
quarter of 2003. While we believe we have a strong position, it is not
possible at this time to state the likelihood of an unfavorable outcome because
of the inherent uncertainties of litigation.

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##### Table of Contents






Item 6.   Exhibits and Reports on Form 8K



| |               
| | --------------
| | (a)   Exhibits

|               |  |                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                       
|               |  |                                                                                                                                                   
|99.1           |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|               |  |                                                                                                                                                   
|99.2           |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.



| |                         
| | ------------------------
| | (b)   Reports on Form 8K



| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On February 3, 2003, a report on Form 8K was filed regarding the
transfer of the Companys common stock from The Nasdaq National Market
to the Nasdaq SmallCap Market.

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##### Table of Contents






Signatures

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|      |             |  |                         |                                                                           
|----- | ----------- |  | ----------------------- | --------------------------------------------------------------------------
|      |             |  | Epoch Biosciences, Inc.
|     
|Date: | May 9, 2003 |  | By:                     | /s/  Bert W. HogueBert W. Hogue
Vice President and Chief Financial Officer

22



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##### Table of Contents






Certifications

I, William G. Gerber, President and Chief Executive Officer of Epoch
Biosciences, Inc. (the Company), certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of the Company;                                                                                                                                                                                                                                                                                                                      
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                          
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                             
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 of the Exchange Act) for the registrant
and we have:                                                                                                                                                         
|  
|   |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;                                                                                      
|  
|   |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                                                                                                        
|  
|   |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                              
|  
|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                           
|  
|   |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                       
|  
|   |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                               
|  
|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|                  |  |     |  |                                                                             
|----------------- |  | --- |  | ----------------------------------------------------------------------------
|Date: May 9, 2003 |  | By: |  | /s/ William G. GerberWilliam G. Gerber
President and Chief Executive Officer

23



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##### Table of Contents



I, Bert W. Hogue, Chief Financial Officer of Epoch Biosciences, Inc. (the
Company), certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of the Company;                                                                                                                                                                                                                                                                                                                      
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                          
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                             
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 of the Exchange Act) for the registrant
and we have:                                                                                                                                                         
|  
|   |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;                                                                                      
|  
|   |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                                                                                                        
|  
|   |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                              
|  
|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                           
|  
|   |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                       
|  
|   |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                               
|  
|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|                  |  |     |  |                                                                          
|----------------- |  | --- |  | -------------------------------------------------------------------------
|Date: May 9, 2003 |  | By: |  | /s/ Bert W. HogueBert W. Hogue
Vice President and Chief Financial Officer

24



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##### Table of Contents



EXHIBIT INDEX

|               |  |                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                       
|               |  |                                                                                                                                                   
|99.1           |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|               |  |                                                                                                                                                   
|99.2           |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

25