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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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Form 10-K/ A

(Amendment No. 1)


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2003

Commission File Number: 0-23736



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Guilford Pharmaceuticals Inc.

(Exact name of registrant as specified in its
charter)


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|Delaware                                                           |  | 52-1841960                       
|(State or other jurisdiction of incorporation
    or organization) |  | (IRS Employer Identification No.)

6611 Tributary Street

Baltimore, Maryland 21224


(410) 631-6300


(Address and telephone number of principal
executive offices)


Securities registered pursuant to Section 12(b) of the
Act:

None


Securities registered pursuant to Section 12(g) of the
Act:

Common Stock, $.01 par value


Title of Class


Indicate by check mark whether the
registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past
90 days.     Yes þ     No o

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this
Form 10-K.      o

Indicate by check mark whether the
Registrant is an accelerated filer (as defined in
Rule 12b-2 of the
Act).     Yes þ     No o

As of June 30, 2003, the aggregate market value of the
approximately 28,931,279 shares of common stock of the
Registrant issued and outstanding on such date, excluding
approximately 2,044,013 shares held by affiliates of the
Registrant, was approximately $119,917,206. This figure is based
on the closing sales price of $4.46 per share of the
Registrants common stock as reported on The NASDAQ®
National Market on June 30, 2003.

As of April 7, 2004,
approximately 33,932,111 shares of common stock of the
Registrant were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the
following documents incorporated by reference and the Part of
the Form 10-K into which the document is incorporated:



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EXPLANATORY NOTE

We are filing this Amendment No. 1 to our annual report on
Form 10-K for the year ended December 31, 2003 as
filed with the Securities and Exchange Commission on
March 15, 2004. This amendment clarifies certain
information in Part I, Item 1 relating to the
description of our intellectual property rights, certain
technology licensing agreements and our research and development
expenses and updates certain information regarding our NAALADase
program. Pursuant to this amendment we are also re-filing
exhibit 10.22 to our Form 10-K to include all exhibits
thereto.

Item 1. Business of Part I is amended by
replacing it in its entirety with the following:

Item 1.     Business.

Overview

Guilford is a pharmaceutical company engaged in the research,
development and commercialization of proprietary pharmaceutical
products that target the hospital and neurology markets. We
market and sell proprietary pharmaceutical products within our
targeted markets, conduct clinical research to expand the
labeled indications for our marketed products, and develop new
product candidates. We also collaborate with other
pharmaceutical companies to support the sales and marketing of
our products and the clinical development of our products and
product candidates.

During 2003, as part of our effort to implement our strategy, we
were successful in expanding the approved uses of GLIADEL®
Wafer to include use at the time of initial surgery for
malignant glioma, acquired AGGRASTAT® Injection, a
hospital-based, anti-platelet aggregation medication from
Merck & Co., Inc., completed Phase II clinical
trials for our AQUAVAN® Injection product candidate in
conscious sedation and initiated a Phase II clinical trial
of GPI 1485, our product candidate for Parkinsons disease
and peripheral nerve injury, for treatment of post-prostatectomy
erectile dysfunction. We supported these activities, in part,
through a number of capital raising activities, including the
completion during the second and third quarters of 2003, of a
$69.4 million convertible debt offering, a $42 million
revenue interest agreement with Paul Royalty Fund, L.P. and Paul
Royalty Fund II, L.P., and a $27.3 million private
placement of our common stock to certain institutional investors.

We were incorporated in Delaware in July 1993. Our
principal executive offices are located at 6611 Tributary
Street, Baltimore, MD 21224. Our telephone number is
(410) 631-6300, and our website address is
http://www.guilfordpharm.com. We make our electronic filings
with the Securities and Exchange Commission (SEC), including our
annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments
to these reports available on our website free of charge as soon
as practicable after we file or furnish them with the SEC.

Financial information prepared in accordance with accounting
principles generally accepted in the United States of America,
including information about revenues from customers, measures of
profit and loss and total assets, can be found in our
consolidated statements included elsewhere in this report.

Marketed Products

We currently have two marketed products: GLIADEL® Wafer and
AGGRASTAT® Injection. GLIADEL® Wafer provides
targeted, site specific chemotherapy for the treatment of
malignant glioma at the time of initial surgery, and for
recurrent glioblastoma multiforme. AGGRASTAT® Injection is
an inhibitor of platelet aggregation approved for the treatment
of acute coronary syndrome.

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The following table summarizes our marketed products:

|                     |  |                                                                                                                            |  |                                                                                                     
|-------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|Marketed Product(1)  |  | Indication/Condition                                                                                                       |  | Status                                                                                              
|                     |  |                                                                                                                            |  |                                                                                                     
|GLIADEL® Wafer       |  | Recurrent glioblastoma multiforme                                                                                          |  | Currently approved for sale in the United States
    and in 25 other countries throughout the world.
|                     |  | Newly diagnosed malignant glioma as an adjunct to
    surgery and radiation (also referred to as first-line
    therapy) |  | Currently approved for sale in the United States
    and Canada.(2)                                 
|AGGRASTAT® Injection |  | Acute coronary syndrome                                                                                                    |  | Marketed by Guilford in the United States and by
    Merck & Co., Inc. in the rest of the world.    



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Marketed means that a product is being sold and
    marketed under applicable regulatory approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | In November 2002, we withdrew an application submitted to the
    European Agency for the Evaluation of Medicinal Products, or the
    EMEA, to approve GLIADEL® Wafer for first-line
    therapy in Europe because we were waiting for the FDA to respond
    to a similar application filed in the United States. In February
    2003, the FDA responded favorably to our application and,
    therefore, we resubmitted this application to the EMEA during
    September 2003, and we expect to be notified of the EMEAs
    decision regarding expanding the label for GLIADEL® Wafer
    during 2004.

Product Candidates

Our product pipeline consists of product candidates in various
stages of clinical and preclinical development. AQUAVAN®
Injection, a prodrug of propofol, is in Phase II clinical trials
for procedural sedation during brief diagnostic or therapeutic
procedures. GPI 1485, our lead neuroimmunophilin ligand
compound, is in Phase II clinical trials for the treatment of
Parkinsons disease and peripheral nerve injury.
DOPASCAN® Injection is in Phase III clinical trials as an
imaging agent to diagnose and monitor the progression of
Parkinsons disease. Our preclinical research programs
include the development of NAALADase inhibitor compounds for
neuropathic pain and for prostate cancer, drug addiction and
traumatic brain and spinal cord injury and the development of
PARP inhibitor compounds for cancer chemosensitization and
radiosensitization.

The following table summarizes our clinical development programs
for our products and product candidates:

|                                             |  |                                                                                                                 |  |             
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------------
|Clinical Development                         |  |                                                                                                                 |  |             
|Programs(1)                                  |  | Indication/Condition                                                                                            |  | Status      
|                                             |  |                                                                                                                 |  |             
|AQUAVAN® Injection                           |  | Procedural sedation for patients undergoing
    colonoscopy or other brief diagnostic or therapeutic procedures |  | Phase II    
|GPI 1485 (our lead neuroimmunophilin ligand) |  | Parkinsons disease; peripheral nerve injury                                                                    |  | Phase II    
|DOPASCAN® Injection                          |  | Imaging agent to diagnose and monitor
    Parkinsons disease.                                                  |  | Phase III(2)
|AGGRASTAT® Injection                         |  | Percutaneous Coronary Intervention                                                                              |  | Phase III(3)



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|    |                                                                                                                                                                                                                                                                                                                                
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|(1) | Clinical Development means that the product is being
    used in clinical trials.                                                                                                                                                                                                                                            
|   
|(2) | MAP Medical Technologies Oy, or MAP, our corporate partner in
    Europe for this technology, has informed us that it submitted an
    application to receive regulatory approval in Finland for
    DOPASCAN® Injection in April 2002. It expects the Finnish
    regulatory authorities to respond to this application during

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| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2004. Daiichi Radioisotope Laboratories, Ltd., or DRL, our
    corporate partner in Japan for this technology, has informed us
    that it applied for marketing approval in Japan with the
    Japanese Health Authority in 2003, and it expects this agency to
    respond to its application during 2004.



|    |                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Currently, AGGRASTAT® Injection does not have a label
    indication for immediate use in a cardiac catheterization
    laboratory in percutaneous coronary intervention, or PCI,
    settings. In order to expand AGGRASTAT® Injections
    label to include PCI, we expect to initiate a Phase III clinical
    trial of AGGRASTAT® Injection in the PCI setting in 2004.

The following table summarizes our key research programs:

|                          |  |                                                                               |  |             |  |                                 
|------------------------- |  | ----------------------------------------------------------------------------- |  | ----------- |  | --------------------------------
|Pre-Clinical and Research |  |                                                                               |  |             |  | Collaborative                   
|Programs(1)               |  | Indication                                                                    |  | Status      |  | Partner                         
|                          |  |                                                                               |  |             |  |                                 
|NAALADase inhibitors      |  | Neuropathic pain                                                              |  | Research    |  |                                
|                          |  | Prostate cancer                                                               |  | Preclinical |  |                                
|                          |  | Drug addiction                                                                |  | Preclinical |  | National Institute of Drug Abuse
|PARP inhibitors           |  | Head and spinal cord injury                                                   |  | Preclinical |  |                                
|                          |  | Cancer chemosensitization and radiosensitization                              |  | Research    |  |                                
|GPI 1485                  |  | HIV-related dementia and neuropathy                                           |  | Preclinical |  |                                
|Cyclophilin ligands       |  | Ischemia, HIV and age-related macular
    degeneration and multiple sclerosis |  | Research    |  |                                



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|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pre-clinical means testing in vitro and in animal
    models, pharmacology and toxicology testing, product formulation
    and process development. Research means initial
    research related to specific molecular targets, synthesis of new
    chemical entities and assay development for the identification
    of lead compounds.

Marketed Products

GLIADEL® Wafer

General

GLIADEL® Wafer is a proprietary cancer chemotherapy product
approved for the treatment of malignant glioma (brain cancer) at
the time of initial surgery, as an adjunct to surgery and
radiation, and for the treatment of recurrent glioblastoma
multiforme, a rapidly fatal form of malignant brain cancer. It
is a biodegradable polymer containing BCNU (carmustine), a
cancer chemotherapeutic drug, and is designed to provide
targeted, site specific chemotherapy. We estimate that there are
11,000 cases of malignant glioma in the United States each year.
After a surgeon resects a brain tumor, up to eight wafers are
implanted in the cavity that remains. Once implanted, the wafers
gradually dissolve, delivering high concentrations of BCNU
directly to the tumor site for an extended period of time. By
inserting the wafer directly at the site of the tumor, the
physician can minimize exposure to BCNU throughout the body and
reduce or alleviate many of the side effects associated with
intravenous chemotherapy.

In 1996, the U.S. Food and Drug Administration
(FDA) approved GLIADEL® Wafer for use as an adjunct to
surgery to prolong survival in patients with recurrent
glioblastoma multiforme, or GBM. Also in 1996, we entered into
agreements with Aventis (then Rhône-Poulenc Rorer) granting
it marketing rights to GLIADEL® Wafer in the U.S. and
clinical development and marketing rights in the rest of the
world (excluding Scandinavia, where the product is distributed
and marketed by Orion Pharma under an agreement with us entered
into in 1995, and later, Japan). Between 1996 and October 2000,
Aventis obtained regulatory

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In October 2000, we reacquired Aventis marketing rights to
GLIADEL® Wafer for 300,000 shares of our common stock then
valued at approximately $8 million. Aventis continued to
market GLIADEL®Wafer for a transition period ending
December 31, 2000, after which we have been solely
responsible for the marketing, sale and distribution of
GLIADEL® Wafer except in Scandinavia, where the product
continues to be sold by Orion Pharma.

In April 2001, we submitted a supplemental New Drug Application
(sNDA) for GLIADEL® Wafer, seeking to expand the label for
the product to include use in initial surgery for malignant
glioma. In March 2002, the FDA sent us a not approvable letter
indicating concerns regarding the survival benefit associated
with GLIADEL® Wafer treatment during initial surgery. In
response to the FDAs letter, we agreed with the FDA on the
protocol and methods for collecting and analyzing long-term
follow up data for the purpose of reapplying for a first surgery
approval. On September 19, 2002, we presented the results
of this analysis to the FDA. On February 25, 2003, the FDA
approved our amended sNDA.

We pay a royalty to Massachusetts Institute of Technology
(MIT) on sales of GLIADEL® Wafer pursuant to the
license agreement under which we acquired the underlying
technology for the product. During 2003, we recognized
approximately $0.8 million in royalty expense to MIT.

Manufacturing and Raw
Materials

We currently manufacture GLIADEL® Wafer using a proprietary
process at our 18,000 square foot facility in Baltimore,
Maryland, which includes areas designated for packaging, quality
assurance, laboratory and warehousing. This facility was
initially inspected by the FDA in October 1995, and it was
re-inspected by the FDA in February 1999 and in September
2002. Also, in October 1999, we were inspected by the
Medicines Control Agency, the United Kingdoms regulatory
authority. The facilities we are currently using for
manufacturing enable us to produce up to 8,000 GLIADEL®
Wafer treatments (each consisting of eight wafers) annually. We
have a second clean room facility, which we expect would allow
us to increase our GLIADEL® Wafer manufacturing capacity to
20,000 treatments annually. We are currently manufacturing
GLIADEL® Wafer at 15% of capacity per year; and therefore,
we believe that our capacity to manufacture GLIADEL® Wafer
will satisfy patient demand for the product.

We believe that the various materials used in GLIADEL®
Wafer are readily available and will continue to be available at
reasonable prices. We have an adequate supply of BCNU, the
active chemotherapeutic ingredient in GLIADEL® Wafer, to
meet our expected demand for the product. Nevertheless, failure
of any supplier to provide sufficient quantities of raw material
for GLIADEL® Wafer in accordance with the FDAs
current Good Manufacturing Practice (cGMP) regulations could
cause delays in our ability to sell the product.

AGGRASTAT®
Injection

General

AGGRASTAT® Injection is a glycoprotein GP IIb/ IIIa
receptor antagonist, indicated for the treatment of acute
coronary syndrome (ACS) including patients who are to be
medically managed and those undergoing percutaneuous
transluminal coronary angioplasty (PTCA) or atherectomy.
ACS includes unstable angina, which is characterized by chest
pain when one is at rest, and non-ST elevation myocardial
infarction (NSTEMI). GP IIb/ IIIa receptor antagonists,
including AGGRASTAT® Injection, block the ability of
platelets to aggregate, thereby inhibiting the formation of
blood clots and reducing the potential for cardiac ischemia.

AGGRASTAT® Injection was developed by Merck & Co., Inc.
(Merck) and was approved by the FDA in May 1998. We acquired the
rights to AGGRASTAT® Injection in the United States and its
territories from Merck in October 2003, for $84 million
plus certain royalty payments to Merck, based on our net sales
of the product. We financed $42 million of the purchase
price through a revenue interest agreement with Paul

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Manufacturing and Raw
Materials

We have entered into an exclusive supply agreement with Merck
for the manufacture and supply of the active pharmaceutical
ingredient (API) of AGGRASTAT® Injection.
AGGRASTAT® Injection finished product is sold in 100 ml and
250 ml pre-mixed bags and 50 ml vials. Merck has agreed to
supply us with the finished product of AGGRASTAT®Injection,
through its contract manufacturers, Baxter (for bags) until
August 2007 and Ben Venue (for vials) and through the end of
2004, or earlier, if we negotiate direct contractual
relationships with those manufacturers.

Commercial Operations

Our commercial operations are comprised of 63 full time sales
and marketing specialists, encompassing medical affairs, sales
operations, sales training and marketing personnel. This
function includes a 49 member United States field sales force, 3
marketing specialists, 5 medical affairs specialists, and 6
people dedicated to additional sales and marketing related
functions. They are responsible for the direct sales and
marketing of GLIADEL® Wafer and AGGRASTAT® Injection
throughout the United States and the sales and marketing of
GLIADEL® Wafer outside the United States, through a network
of specialty pharmaceutical distributors. We established our
commercial operations capabilities in connection with our
reacquisition of commercial rights to GLIADEL®Wafer, during
the fourth quarter of 2000 and the first quarter of 2001. In
order to assist in the distribution of GLIADEL® Wafer in
the United States, we engaged Cord Logistics Inc., in
November 2000, to handle fulfillment of customer orders.

In Europe, we have an agreement with IDIS Limited, based in the
U.K., for the distribution of GLIADEL® Wafer to our network
of European distributors and on a named hospital basis in
countries where we have not engaged a third-party distributor.
To date, we have entered into agreements for the marketing, sale
and distribution of GLIADEL® Wafer in Italy, Portugal,
Spain, the United Kingdom, Greece, South Africa, Australia,
Israel, Hong Kong and the Peoples Republic of China, as
well as in other international markets.

Through our acquisition of AGGRASTAT® Injection, we have
leveraged our commercial operations capabilities across two
marketed products. We also expect our experience in commercial
operations to benefit us when product candidates in our
pipeline, such as AQUAVAN® Injection, are able to be
marketed following FDA approval.

In 2003, 2002 and 2001, sales of GLIADEL® Wafer generated
revenues of $19.2 million, $14.5 million, and
$20.4 million, respectively, which represented 70%, 99%,
and 99% of our total revenues, respectively. Approximately 69%
of our sales of GLIADEL® Wafer in 2002 and approximately
76% in 2003 were made to Specialty Pharmaceuticals Distribution
(SPD), a division of Cardinal Health, Inc. (formerly known as
National Specialty Services, Inc.) under a distribution
agreement with SPD. Because we acquired AGGRASTAT®
Injection in October 2003, we only generated revenues from this
product for November and December 2003. For those two months,
AGGRASTAT® Injection generated revenues of
$2.5 million, representing 9% of our total revenues for
2003.

Clinical Development Programs

AQUAVAN®
Injection

AQUAVAN® Injection is a novel sedative/hypnotic. We are
currently studying AQUAVAN® Injection for procedural
sedation during brief diagnostic and therapeutic medical
procedures. Procedural sedation is mild to moderate
sedation in which patients are lethargic, but responsive to
stimulation and are able to

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Our clinical trials with AQUAVAN® Injection have studied
its use in connection with elective colonoscopy. In November
2003, we announced that we had completed a preliminary analysis
from a Phase II, open label, multi-center adaptive dose ranging
study of AQUAVAN® Injection, used in combination with
fentanyl citrate, to provide mild sedation in healthy patients
aged 18-60 undergoing elective colonoscopy. The analysis we
submitted to the FDA suggests that AQUAVAN® Injection
provides rapid onset and rapid recovery from sedation/anesthesia
in a convenient dosing regimen and without serious adverse
effects. We also conducted a confirmatory Phase II study of
AQUAVAN® Injection to evaluate the fixed dose identified in
our dose ranging study. Pending agreement with the FDA, we
expect to begin a Phase III clinical trial program studying
AQUAVAN® Injection for procedural sedation during 2004, in
as many as four separate indications.

We licensed the rights to AQUAVAN® Injection from ProQuest
Pharmaceuticals Inc. (ProQuest) during the first quarter of
2000. AQUAVAN® Injection is a prodrug of a widely-used
anesthetic, propofol. A prodrug is a compound that is converted
in the body into an active drug. AQUAVAN® Injection, is
water-soluble and converts to propofol in the body upon
intravenous administration. As a result of the bodys
conversion of AQUAVAN® Injection into propofol, low,
therapeutically effective levels of propofol are released while
avoiding the high levels of propofol seen after injection with
the FDA approved propofol lipid emulsion. In addition, the
administration of propofol lipid emulsion can cause other
complications.

Since we licensed AQUAVAN® Injection from ProQuest, we have
also conducted four Phase I clinical studies in Europe in
healthy volunteers, one Phase I clinical study in the United
States and a Phase II clinical trial of AQUAVAN® Injection
in patients undergoing coronary artery surgery. This second
Phase II study, took place in Europe and was the first use of
AQUAVAN® Injection in surgical patients. The purpose of the
study was to evaluate the safety, tolerability and efficacy of
AQUAVAN® Injection, compared to DIPRIVAN® Injectable
Emulsion (i.e., the branded formulation of propofol), for use in
pre-operative sedation, anesthesia induction and maintenance,
and post-operative ICU sedation in patients undergoing coronary
artery bypass surgery. We announced the results of this clinical
trial in November 2003. These results suggest that AQUAVAN®
Injection could be used to provide total intravenous anesthesia
for complex medical and surgical procedures in high risk
patients. There were no drug-related serious adverse events in
either the AQUAVAN® Injection or DIPRIVAN® Injectable
Emulsion treatment groups.

We have exclusive rights in the U.S. to a composition of matter
patent covering AQUAVAN® Injection.

GPI 1485/ Neuroimmunophilin
Ligand Program

GPI 1485 is our investigational new drug that belongs to a class
of small molecule compounds called neuroimmunophilin ligands. It
is orally administered and, in preclinical experiments, has been
shown to repair and regenerate damaged nerves without affecting
normal healthy nerves. GPI 1485 and other neuroimmunophilin
ligands may have application in the treatment of a broad range
of diseases and conditions, including Parkinsons disease,
spinal cord injury, brain trauma, and peripheral nerve injuries.
We are currently studying GPI 1485 for use in connection with
the treatment of Parkinsons disease and post-prostatectomy
erectile dysfunction, a condition caused by peripheral nerve
injury at the time of surgery.

Parkinsons disease is a chronic, progressive degenerative
disorder that affects over one million people in the United
States. While the exact cause of the disease is not known,
physicians have observed that patients with the disease
experience a progressive deterioration of dopamine nerve cells
located in a specific region of the brain. The loss of these
nerve cells is believed to contribute to the symptoms of
Parkinsons disease, which include the loss of muscle tone
and coordination, tremors, and non-motor symptoms, such as
changes in appetite, cognition, sleep and mood. In October 2003,
we announced that we completed enrollment in a Phase II clinical
trial studying GPI 1485, compared to placebo, in slowing the
rate of decline of dopamine transporters. This trial is a
multi-center, randomized, double-blind, placebo-controlled
evaluation of the safety, pharmacokinetics and efficacy of GPI
1485 in 212 patients with mild to moderate Parkinsons
disease. Clinical endpoints in the trial include changes in the
daily amount of anti-Parkinsonian medication

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In November 2003, we announced that we had initiated a Phase II
clinical trial with GPI 1485 for the treatment of
post-prostatectomy erectile dysfunction (PPED). In PPED, sexual
dysfunction occurs as a result of compression or stretch injury
to nerve fibers that surround the prostate and which are
responsible for trapping blood flow to sustain a penile
erection. Unfortunately, a high proportion of men undergoing
radical prostate surgery may experience side effects from their
surgery including urinary incontinence and sexual dysfunction,
which is frequently unresponsive to currently available drug
therapies, including VIAGRA®. GPI 1485 represents a novel
approach to the treatment of PPED by potentially promoting the
protection and regeneration of peripheral nerves that may
sustain injury during radical prostate surgery.

History of Neuroimmunophilin
Ligand Program

Our neuroimmunophilin ligand program, originated from
observations first made in the laboratory of Dr. Solomon
Snyder, Director of the Department of Neuroscience at Johns
Hopkins and one of our directors and founders, that certain
proteins that exist within a cell, known as
immunophilins, are enriched 10-40 fold in certain
areas of the central nervous system. The Johns Hopkins
scientists went on to discover that commonly used
immunosuppressive drugs can promote nerve growth. We have
exclusively licensed rights to patent applications relating to
this research from Johns Hopkins. Our scientists, together with
their academic collaborators, further demonstrated that the
pathway leading to nerve regeneration could be separated from
the immunosuppressant pathway. As a result of this basic
research, Guilford scientists discovered GPI 1485 and many other
proprietary neuroimmunophilin ligands, which are neurotrophic,
i.e., regenerate nerves, in animal models of various disease
states without being immunosuppressive, are orally-bioavailable
and are able to cross the blood-brain barrier.

In August 1997, we entered into a collaboration with Amgen Inc.
to develop and commercialize a broad class of neuroimmunophilin
ligands, referred to as FKBP neuroimmunophilin ligands, as well
as any other compounds that may have resulted from the
collaboration, for all human therapeutic and diagnostic
applications. During 1998, Amgen nominated GPI 1485, which it
called NIL-A, as the lead compound in the program,
initially targeting Parkinsons disease. During 1999, Amgen
filed an Investigational New Drug, or IND, application with the
FDA and commenced human trials with NIL-A, focusing on safety,
tolerability and pharmacokinetic study in healthy subjects.
NIL-A entered Phase II testing in patients with Parkinsons
disease during 2000. In July 2001, we announced results of this
six-month Phase II, randomized, double blind, placebo-controlled
evaluation of the safety, pharmacokinetics and efficacy of NIL-A
in patients with mild to moderate Parkinsons disease. The
results of the evaluation suggest that NIL-A at doses of up to
1,000 mg taken orally four times a day for six months is well
tolerated, but does not produce a significant reversal of the
motor symptoms of Parkinsons disease.

In September 2001, Amgen terminated the collaboration and,
thereafter, returned all rights to the neuroimmunophilin
technology to us, including certain clinical trial supplies for
which we paid $0.2 million. After we regained the rights to
this technology, we continued to analyze the results of
Amgens Phase II trial and determined that the trial
suggested that oral administration of GPI 1485 may retard the
loss of dopamine transporters.

We have more than 60 U.S. patents protecting our
Neuroimmunophilin ligand technology.

DOPASCAN®
Injection

DOPASCAN® Injection is our product candidate for the
diagnosis and monitoring of Parkinsons disease to which we
obtained exclusive patent rights from the Research Triangle
Institute (RTI) in Research Triangle Park, North Carolina,
where it was invented. DOPASCAN® Injection is administered
intravenously in trace quantities and allows physicians to
obtain images and measure the density of dopamine neurons in the
brain. Dopamine neurons are highly concentrated in a specialized
area of the brain. These neurons degenerate

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We have entered into an agreement with Daiichi Radioisotope
Laboratories, Ltd., or DRL, a leading Japanese
radiopharmaceutical company, to develop and commercialize
DOPASCAN® Injection in Japan, Korea and Taiwan. DRL has
informed us that it completed a Phase III clinical trial with
the product in July 2002, filed an application for regulatory
approval in June 2003, with the Japanese Health Authority, and
expects to be informed about the status of that application
during 2004. In January 2002, we sublicensed European rights for
the development and commercialization of DOPASCAN®
Injection to MAP, a division of Schering AG located in Finland.
MAP has informed us that it submitted an application to receive
regulatory approval in Finland for DOPASCAN® Injection in
April 2002. It expects the Finnish regulatory authorities to
respond to this application during 2004.

In May 2002, we sublicensed DOPASCAN® Injection for
research purposes to Molecular Neuroimaging LLC, or MNI, a
privately held company based in New Haven, Connecticut that
specializes in the use of brain imaging technologies for, among
other purposes, the analysis of clinical trials of
pharmaceutical product candidates targeting neurodegenerative
diseases. During the term of our agreement, MNI has also agreed
to provide us with favorable pricing for its services (including
the administration of DOPASCAN® Injection) for any clinical
trials for our product candidates. Presently, we have engaged
MNI to provide its services for our clinical trial of GPI 1485
for Parkinsons disease.

We currently do not have a clinical development program for
DOPASCAN® Injection in the United States; and therefore, do
not expect to be applying to the FDA to market and sell
DOPASCAN®Injection.

AGGRASTAT®
Injection

In October 2003, we acquired rights to AGGRASTAT® Injection
in the U.S. and its territories from Merck. Between 1999 and
2001 Merck conducted a Phase III clinical trial in order to
obtain a label for immediate percutaneous coronary intervention
in a cardiac catheterization laboratory, or PCI. In that trial,
called TARGET, Merck attempted to show AGGRASTAT® Injection
was not inferior to ReoPro (abciximab), the drug believed to be
most effective in the PCI setting, but failed to do so. Based on
several other trials that have been conducted since TARGET, it
is now believed that the dose of AGGRASTAT® Injection used
in TARGET was not sufficient. Based on these data, we plan to
conduct a clinical study with AGGRASTAT® Injection using an
appropriately higher dose, for the purpose of expanding the
label to include use in the PCI setting. We expect to begin this
trial by the third quarter of 2004.

Pre-Clinical and Research Programs

NAALADase Inhibitor
Compounds

NAALADase, or N-Acetylated-Alpha-Linked-Acid-Dipeptidase, is a
membrane-bound enzyme found in the central and peripheral
nervous system. NAALADase is believed to play a role in
modulating the release of glutamate in the nervous system.
Glutamate is one of the brains most common chemical
messengers. Under normal conditions, glutamate is released into
a microscopic space, called the synapse, that exists between
neurons in the brain. There, it stimulates post-synaptic
glutamate receptors, an action that is critical to such
functions as learning, memory and motor control. However, during
conditions of acute injury or chronic disease, there may be a
large increase in glutamate release that incites a cascade of
biochemical events, ultimately leading to cell injury or death.
Our NAALADase inhibitor program is aimed at developing a
commercial drug to block excessive glutamate release.

In several animal models of diabetic neuropathy and neuropathic
pain, our NAALADase inhibitors appear to normalize pain
sensitivity, increase nerve conduction velocity and prevent
nerve degeneration. Initially, we selected GPI 5693 as a lead
NAALADase inhibitor compound and commenced Phase I clinical
studies with this compound in early 2001 for the treatment of
neuropathic pain and the underlying disease process associated
with diabetic peripheral neuropathy. This Phase I Study,
conducted in Europe, evaluated the safety, tolerability and
pharmacokinetics of the compound in healthy subjects and
suggested that it may be

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In May 2003, we entered into an agreement granting Pfizer the
exclusive right to develop NAALADase inhibitors worldwide, for
which Pfizer paid us $5 million upon the execution of the
agreement, and was to pay us $10 million on or before
March 31, 2004. In March 2004, Pfizer informed us that
the milestone payment would not be made and that Pfizer was
terminating the agreement. As a result of Pfizers
termination, all rights to develop and commercialize the
NAALADase inhibitor technology granted to Pfizer reverted to us
and no further milestone payments or royalties are to be
received from Pfizer.

We are currently pursuing the development of GPI 5693 for
prostate cancer and drug addiction.

We have 38 U.S. patents and corresponding foreign counterparts
protecting our NAALADase technology.

PARP Inhibitor
Compounds

Poly(ADP-ribose) polymerase, or PARP, is an abundant nuclear
enzyme found in most eukaryotic tissues. Upon activation by DNA
damage, PARP synthesizes poly(ADP-ribose) from nicotinamide
adenine dinucleotide (NAD). As a component of the DNA base
excision repair system, PARP plays a major role in facilitating
DNA repair and maintaining genomic integrity. In cancer
treatment, high PARP activity is believed to enable tumor cells
to counteract the chemotherapy and radiation therapy by
repairing DNA damage. In animal testing, PARP inhibition
enhances the activity of radiotherapy, as well as a wide
spectrum of chemotherapeutic agents. In ischemia,
over-activation of PARP mediates necrosis by depleting NAD and
ATP. In animal testing, PARP inhibition provides neuroprotection
in stroke and myocardial ischemia models.

Our scientists have synthesized several families of potent
orally bioavailable small molecule PARP inhibitors that are
efficacious in rodent models of cancer and ischemia. Our lead
compound, GPI 15427, is highly brain penetrable and has shown
robust chemo- and radio-sensitization in several brain cancer
and ischemia models. We are currently conducting preclinical
toxicology and pharmacokinetic characterization of GPI 15427 for
clinical development.

Neuroimmunophilin ligands
and other neurotrophic and cytoprotective small molecules

In September 2003, the NIH awarded a $5.5 million four-year
program project grant to the Johns Hopkins University and us to
study the effects of GPI 1485 in HIV neuropathy and dementia.
These studies include cell culture neurotoxicity assays, animal
experiments, and culminate in a human clinical study, which we
expect will begin in 2005. Additional GPI 1485 preclinical
studies including protection from sensorineural hearing loss,
stimulation of hair growth, and neuroprotective and
neuroregenerative mechanistic studies are ongoing.

Our scientists have also developed potent, novel, orally-active
small molecule ligands of cyclophilin that may be
neuroprotective and neuroregenerative. These compounds have
shown neuroprotection and neurite

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Exploratory Research

We have several promising early stage programs in the
neuroprotection and cancer therapeutic areas. Our scientists are
pursuing two strategies for inhibition of neuronal death in
neurodegenerative diseases. One strategy targets enzymes, such
as serine racemase, involved in regulating the activity of the
neurotransmitter glutamic acid. Glutamate is a major
neurotransmitter in the nervous system, but is neurotoxic in
excessive amounts, and elevated levels of glutamate have been
implicated in a variety of nervous system disease states. In a
second approach, our scientists are developing compounds that
inhibit cell death caused by signals from the mitochondria in
cells. Mitochondria are the batteries that produce
energy in the form of ATP in cells, and are important mediators
of neuronal death in neurodegenerative diseases. Our scientists
have discovered novel series of potent compounds that inhibit
mitochondrial death signaling, and are pursuing the development
of drug-like small molecules based on these discoveries. In the
cancer area, we have discovered novel compounds that modulate
the activity of the protein p53, a major protector of cells
against cancer. By increasing p53 activity, these compounds
inhibit cancer cell growth in a variety of cancer cell lines.
Our scientists are also engaged in structure-based drug design
targeting a class of proteins called molecular chaperones whose
activity is increased in cancer cells.

Reorganization

On July 30, 2002, we announced a reorganization of our
research and development programs, which included a workforce
reduction of 58 employees, most of whom worked in the areas of
research and development. In connection with this
reorganization, we discontinued further development of our
polyphosphoester biopolymer drug delivery program, or PPE
Program. The PPE Program included our PACLIMER®
Microspheres and LIDOCAINE-PE Microspheres (formerly known as
LIDOMER Microspheres) development programs. PACLIMER®
Microspheres is a product candidate for investigating
controlled, site-specific administration and release of
paclitaxel (brand name TAXOL®) for ovarian cancer and
non-small cell lung cancer. LIDOCAINE-PE Microspheres is a
product candidate for controlled, site-specific administration
and release of LIDOCAINE, a commonly used analgesic, for
post-operative pain.

In order to further develop the programs that were affected by
this reorganization, we are pursuing corporate partnerships and
other similar licensing transactions.

Government Regulation and Product Testing

All domestic prescription pharmaceutical manufacturers are
subject to extensive regulation by the federal government,
principally the FDA and, to a lesser extent, by state and local
governments as well as foreign governments if products are
marketed abroad. Biologics and controlled drug products, such as
vaccines and narcotics, and radiolabeled drugs, are often
regulated more stringently than are other drugs. The Federal
Food, Drug, and Cosmetic Act and other federal statutes and
regulations govern or influence the development, testing,
manufacture, labeling, storage, approval, advertising,
promotion, sale and distribution of prescription pharmaceutical
products. Pharmaceutical manufacturers are also subject to
certain inspection, registration, recordkeeping and reporting
requirements. Noncompliance with applicable requirements can
result in warning letters, fines, recall or seizure of products,
total or partial suspension of production and/or distribution,
refusal of the government to enter into supply contracts or to
approve marketing applications and criminal prosecution.

Upon FDA approval, a drug may only be marketed in the United
States for the approved indications in the approved dosage forms
and at the approved dosage levels. The FDA also may require
post-approval testing and surveillance to monitor a drug in
larger and more diverse patient populations. Manufacturers of
approved drug products are subject to ongoing compliance with
FDA regulations. For example, the FDA mandates that drugs be
manufactured in conformity with the FDAs applicable cGMP
regulations. In complying with the cGMP regulations,
manufacturers must continue to spend time, money and effort in
production, recordkeep-

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Full Clinical Testing
Requirements

The steps required before a drug may be commercially distributed
in the United States include: (i) conducting appropriate
pre-clinical laboratory and animal tests; (ii) submitting
to the FDA an application for an IND, which must become
effective before clinical trials may commence;
(iii) conducting well-controlled human clinical trials that
establish the safety and efficacy of the drug product;
(iv) filing with the FDA a New Drug Application
(NDA) for non-biological drugs; and (v) obtaining FDA
approval of the NDA prior to any commercial sale or shipment of
the non-biological drug. NDAs also must include a
description of the manufacturing processes, including quality
control procedures and validation requirements.

With respect to a drug product with an active ingredient not
previously approved by the FDA, the manufacturer must usually
submit a full NDA, including complete reports of pre-clinical,
clinical and laboratory studies, to prove that the product is
safe and effective. A full NDA may also need to be submitted for
a drug product with a previously approved active ingredient if
studies are required to demonstrate safety and efficacy, such as
when the drug will be used to treat an indication for which the
drug was not previously approved, or where the dose or method of
drug delivery is changed. In addition, the manufacturer of an
approved drug may be required to submit for the FDAs
review and approval a supplemental NDA, including reports of
appropriate clinical testing, prior to marketing the drug with
additional indications or making other significant changes to
the product or its manufacture. A manufacturer intending to
conduct clinical trials ordinarily will be required first to
submit an IND to the FDA containing information relating to
previously conducted pre-clinical studies.

Pre-clinical testing includes formulation development,
laboratory evaluation of product chemistry and animal studies to
assess the potential safety and efficacy of the product
formulation. Pre-clinical tests to support an FDA application
must be conducted in accordance with the FDA regulations
concerning Good Laboratory Practices (GLPs). The results of the
pre-clinical tests are submitted to the FDA as part of the IND
and are reviewed by the FDA prior to authorizing the sponsor to
conduct clinical trials in human subjects. Unless the FDA issues
a clinical hold on an IND, the IND becomes effective 30 days
following its receipt by the FDA. There is no certainty that
submission of an IND will result in the commencement of clinical
trials or that the commencement of one phase of a clinical trial
will result in commencement of other phases or that the
performance of any clinical trials will result in FDA approval.

Clinical trials for new drugs typically are conducted in three
phases, are subject to detailed protocols and must be conducted
in accordance with the FDAs regulations concerning good
clinical practices (GCPs). Clinical trials involve the
administration of the investigational drug product to human
subjects. Each protocol indicating how the clinical trial will
be conducted in the United States must be submitted for review
to the FDA as part of the IND. The FDAs review of a study
protocol does not necessarily mean that, if the study is
successful, it will constitute proof of efficacy or safety.
Further, each clinical study must be conducted under the
auspices of an independent institutional review board (IRB)
established pursuant to FDA regulations. The IRB considers,
among other factors, ethical concerns and informed consent
requirements. The FDA or the IRB may require changes in a
protocol both prior to and after the commencement of a trial.
There is no assurance that the IRB or the FDA will permit a
study to go forward or, once started, to be completed. Clinical
trials may be placed on hold at any time for a variety of
reasons, particularly if safety concerns arise, or regulatory
requirements are not met.

The three phases of clinical trials are generally conducted
sequentially, but they may overlap. In Phase I, the initial
introduction of the drug into humans, the drug is tested for
safety, side effects, dosage tolerance,

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Reports of results of the pre-clinical studies and clinical
trials for non-biological drugs are submitted to the FDA in the
form of an NDA for approval of marketing and commercial shipment.

The median FDA approval time for an NDA is currently about
15 months for new drugs, although clinical development,
reviews, or approvals of treatments for cancer and other serious
or life-threatening diseases may be accelerated, expedited or
fast-tracked. In addition, approval times can vary widely among
the various reviewing branches of the FDA. The approval process
may take substantially longer if, among other things, the FDA
has questions or concerns about the safety and/or efficacy of a
product. In general, the FDA requires at least two properly
conducted, adequate and well-controlled clinical studies
demonstrating safety and efficacy with sufficient levels of
statistical assurance. In certain limited cases the FDA may
consider one clinical study sufficient. The FDA also may request
long-term toxicity studies or other studies relating to product
safety or efficacy. For example, the FDA may require additional
clinical tests following NDA approval to confirm product safety
and efficacy (Phase IV clinical tests) or require other
conditions for approval. Notwithstanding the submission of such
data, the FDA ultimately may decide that the application does
not satisfy its regulatory criteria for approval.

The full NDA process for newly marketed non-biological drugs,
such as GPI 1485, NAALADase Inhibitors and AQUAVAN®
Injection those being developed by us, including
neuroimmunophilin ligand products and inhibitors of NAALADase,
can take a number of years and involves the expenditure of
substantial resources. There can be no assurance that any
approval will be granted on a timely basis, or at all, or that
we will have sufficient resources to carry such potential
products through the regulatory approval process.

Other Regulation

Products marketed outside the United States, which are
manufactured in the United States are subject to certain FDA
export regulations, as well as regulation by the country in
which the products are to be sold. U.S. law can prohibit the
export of unapproved drugs to certain countries abroad. We also
would be subject to foreign regulatory requirements governing
clinical trials and pharmaceutical sales, if products are
marketed abroad. Whether or not FDA approval has been obtained,
approval of a product by the comparable regulatory authorities
of foreign countries must usually be obtained prior to the
commencement of marketing of the product in those countries. The
approval process varies from country to country and the time
required may be longer or shorter than that required for FDA
approval.

In addition to the requirements for product approval, before a
pharmaceutical product may be marketed and sold in certain
foreign countries the proposed pricing for the product must be
approved as well. Products may be subject to price controls
and/or limits on reimbursement. The requirements governing
product pricing and reimbursement vary widely from country to
country and can be implemented disparately at the national
level. The European Union generally provides options for its
fifteen Member States to restrict the range of medicinal
products for which their national health insurance systems
provide reimbursement.

We are also governed by other federal, state and local laws.
These laws include, but are not limited to, those regulating
working conditions enforced by the Occupational Safety and
Health Administration and regulating environmental hazards under
such statutes as the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other environmental laws
enforced by the United States Environmental

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Intellectual Property Rights

As of December 31, 2003, we owned or had licensed rights to
more than 160 U.S. patents and more than 150 foreign patents. In
addition, we owned or had licensed more than 600 pending
applications worldwide. We also own registered trademarks to
AGGRASTAT®, AQUAVAN®, DOPASCAN®, GLIADEL®
and PACLIMER®. The following charts identify the number of
patents and patent applications that protect or relate to our
marketed products, product candidates and key research programs,
and whether those patents or patent applications are issued (or
filed) in the United States or internationally.

United States Patent Portfolio

|                     |  |              |    |                     |  |  |    | 
|-------------------- |  | ------------ | -- | ------------------- |  |  | -- | 
|                     |  |              |    | # of pending patent
|Technology           |  | # of Patents |    | applications       
|                     |  |              |    |                    
|GLIADEL® Wafer       |  |              | 3  |                     |  |  |   | 
|                    
|                    
|                    
|                    
|AGGRASTAT® Injection |  |              | 10 |                     |  |  | 1  | 
|                    
|                    
|                    
|                    
|AQUAVAN® Injection   |  |              | 1  |                     |  |  | 2  | 
|                    
|                    
|                    
|                    
|GPI 1485             |  |              | 4  |                     |  |  | 9  | 
|                    
|                    
|                    
|                    
|DOPASCAN® Injection  |  |              | 10 |                     |  |  | 5  | 
|                    
|                    
|                    
|                    
|NAALADase Inhibitors |  |              | 38 |                     |  |  | 10 | 
|                    
|                    
|                    
|                    
|PARP Inhibitors      |  |              | 18 |                     |  |  | 11 | 
|                    
|                    
|                    
|                    
|Cyclophilins         |  |              | 4  |                     |  |  | 7  | 

International Patent Portfolio

|                     |  |              |    |                     |  |  |    | 
|-------------------- |  | ------------ | -- | ------------------- |  |  | -- | 
|                     |  |              |    | # of pending patent
|Technology           |  | # of Patents |    | applications       
|                     |  |              |    |                    
|GLIADEL® Wafer       |  |              | 36 |                     |  |  |   | 
|                    
|                    
|                    
|                    
|AGGRASTAT® Injection |  |              |   |                     |  |  |   | 
|                    
|                    
|                    
|                    
|AQUAVAN® Injection   |  |              | 2  |                     |  |  | 22 | 
|                    
|                    
|                    
|                    
|GPI 1485             |  |              | 5  |                     |  |  | 42 | 
|                    
|                    
|                    
|                    
|DOPASCAN® Injection  |  |              | 36 |                     |  |  | 11 | 
|                    
|                    
|                    
|                    
|NAALADase Inhibitors |  |              | 19 |                     |  |  | 89 | 
|                    
|                    
|                    
|                    
|PARP Inhibitors      |  |              | 4  |                     |  |  | 24 | 
|                    
|                    
|                    
|                    
|Cyclophilins         |  |              | 3  |                     |  |  | 34 | 

The patents covering GLIADEL® Wafer are licensed and expire
in the United States in August 2006. The international patents
covering GLIADEL® Wafer expire no earlier than 2006 and
continue through 2011. The patents covering AGGRASTAT®
Injection are licensed and expire no earlier than 2012. The
patents covering AQUAVAN® Injection are both licensed and
owned and expire no earlier than 2018. The patents covering GPI
1485 are both licensed and owned and expire no earlier than
2015. The patents covering DOPASCAN® Injection are licensed
and expire no earlier than 2009. Because we have not yet
selected clinical candidates for the remainder of our
technologies, information regarding whether patents relating to
these technologies are owned or licensed and the dates when
these patents expire may not be relevant to the

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The value of our intellectual property rights is subject to
various uncertainties and contingencies. The scope of
intellectual property protection afforded to pharmaceutical and
biotechnological inventions is uncertain, and our product
candidates are subject to this uncertainty. We cannot be certain
that any of our patent applications will be granted, that
additional products or processes we develop will be patentable,
or that any of our patents will provide us with any competitive
advantages. In addition, any existing or future patents or
intellectual property owned by us may be challenged, invalidated
or circumvented by others.

Further, other companies have been issued patents and have filed
patent applications relating to our key technologies. While we
do not believe that we are infringing any valid patents of which
we are aware, we cannot be certain that our products or product
candidates will not infringe or be dominated by patents that
have issued or may issue to third parties.

We control the disclosure and use of our proprietary information
through confidentiality agreements with employees, consultants
and other third parties. However, our confidentiality agreements
may not be honored, disclosure of our proprietary information
may occur, and disputes may arise concerning the ownership of
intellectual property or the applicability of confidentiality
obligations.

We support and collaborate in research conducted by other
companies, universities and governmental research organizations.
We may not be able to acquire exclusive rights to the
intellectual property derived from such collaborations and
disputes may arise as to rights in derivative or related
research programs that we conduct. To the extent that
consultants or other research collaborators use third
parties intellectual property in their work with us,
disputes may also arise as to the rights to resulting
intellectual property. In addition, in the event we breach any
of our collaborative research contracts, such a breach may cause
us to lose certain licensed intellectual property rights.

If we are required to defend against charges of infringement of
intellectual property rights of third parties or assert our own
intellectual property rights against third parties, we may incur
substantial costs and could be enjoined from commercializing
certain products. We may also be required to pay monetary
damages. To avoid or settle litigation, we may seek licenses
from third parties or attempt to redesign our products or
processes to avoid infringement. However, we may not be
successful in obtaining licenses or successfully redesigning our
products or processes.

We could also be required to participate in U.S. interference
proceedings or international patent oppositions. In fact, in
order to protect our intellectual property position with respect
to our neuroimmunophilin ligands, we filed a European opposition
in 1998 to revoke another companys European patent. In
2000, we won this opposition, and the subject patent was
revoked. However, the patentee has appealed the initial
determination, and the patent could be reinstated.

Technology Licensing
Agreements

We have entered into a number of technology licensing agreements
through which we have obtained development and commercialization
rights to various marketed products, product candidates and
research programs.

GLIADEL®
Wafer

In March 1994, we entered into an agreement (the
GLIADEL®Wafer Agreement) with Scios Inc.
pursuant to which we licensed from Scios exclusive worldwide
rights to numerous U.S. patents and patent applications and
corresponding international patents and patent applications for
polyanhydride biodegradable polymer technology for use in the
field of tumors of the central nervous system and cerebral
edema. GLIADEL® Wafer is covered under this license by two
U.S. patents and certain related international patents and
patent applications. The patent rights in the U.S. will expire
in 2006. In April 1994, Scios assigned all of its rights and
obligations under the GLIADEL® Wafer Agreement to MIT. We
have exclusive worldwide rights to the technology for brain
cancer therapeutics, subject to certain conditions, including a
requirement to

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Under the GLIADEL® Wafer Agreement, we are obligated to pay
a royalty of 4% on all net sales of products incorporating the
technology covered by the agreement, as well as 25% of all
proceeds from sublicensees and 4% of proceeds from corporate
partners. Additionally, we were required to pay MIT $8,000
annually as advanced royalty payments under the license
agreement until the first commercial sale of GLIADEL and were
subject to a minimum annual royalty payment requirement of
$15,000, $24,000 and $24,000, for the first three years of
commercial sales of the product. For a particular country, our
obligation to pay a royalty on net sales expires upon the later
to occur of (i) the expiration of the relevant patent
rights in such country or (ii) 15 years after the
first sale of a commercial product derived from the licensed
technology in such country. We also are obligated to meet
certain development milestones. As of December 31, 2003, we
had paid a total of approximately $3 million in royalty
payments to Scios and MIT under this license agreement.

Each party may terminate the agreement if the other party
materially breaches the agreement, subject to prior notice to
and an opportunity to cure by the offending party. Additionally,
we may terminate the agreement at any time with six months prior
written notice to MIT. Upon termination of the agreement (other
than because of a material breach by MIT) all license rights
revert to MIT, subject to our limited right to use the licensed
technology for a 90-day transition period following termination
of the agreement. Although we believe that we can comply with
our obligations, our failure to perform these obligations could
result in losing our rights to new polymer-based products.

In addition to the GLIADEL® Wafer Agreement, we have
entered into an agreement with Orion Pharma for the distribution
and marketing of GLIADEL® Wafer in Scandinavia, the
existence and terms of which we do not believe are material to
our business.

AQUAVAN®
Injection

In March 2000, we entered into a license agreement with ProQuest
Pharmaceuticals Inc., or ProQuest, which granted us exclusive
worldwide development and commercialization rights to
AQUAVAN® Injection. Under the terms of the license
agreement, we made an upfront payment of $1 million to ProQuest,
of which $250,000 was used to acquire an equity position in the
company. In addition, we are required to make the following
payments to ProQuest based on the achievement of certain
development milestones: $250,000 following the dosing of the
first human patient; $750,000 following the dosing of the first
human patient in a Phase II clinical trial; $1 million
following the dosing of the first human patient in a
Phase III clinical trial; $2 million following
submission of an NDA that would enable the general marketing of
AQUAVAN® in a particular country; and $5 million upon
receipt of clearance to market and sell AQUAVAN® in the
United States ($3 million for the first European country to
permit the marketing and sale of AQUAVAN® and
$1 million upon the receipt of approval to market and sell
AQUAVAN® in Japan). As of December 31, 2003, we had
paid a total of $2 million in milestone payments to
ProQuest under this license agreement.

We are also required to pay ProQuest royalties ranging from 5%
to 9% of net sales of AQUAVAN®, based on our achievement of
certain net sales thresholds. Royalties are payable upon a
country by country basis until the last to expire of the patent
or patents covering AQUAVAN® in such country, or in the
case of countries in which no patents have been issued, until
the last to expire of the patents for AQUAVAN® in the
United States, France, Germany and the United Kingdom.

The license agreement may be terminated by us at any time upon
60 days prior written notice to ProQuest and by ProQuest
upon, among other events, a material breach by us of the terms
of the license agreement (subject to prior notice and an
opportunity to cure) or upon our failure to achieve certain
development and commercialization milestones. Upon termination
of the license agreement (other than because of a material
breach by ProQuest), all licensed rights to AQUAVAN® revert
to ProQuest, subject to our limited right to use the licensed
technology for a six month transition period following
termination of the license agreement.

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DOPASCAN®
Injection

We obtained exclusive worldwide rights to DOPASCAN®
Injection pursuant to a March 1994 license agreement (the RTI
Agreement) with Research Triangle Institute (RTI), which grants
us rights to various U.S. and international patents and patent
applications relating to binding ligands for certain receptors
in the brain which are or may be useful as dopamine neuron
imaging agents. DOPASCAN® Injection and certain related
precursors and analogues are covered by U.S. patents, which
expire in 2009, as well as certain related international patents
and patent applications. Under the RTI Agreement, we have paid
RTI a total of $800,000 as reimbursement for certain past,
patent-related expenses and as annual payments pursuant to an
agreement to support mutually agreed-upon research that was
conducted at RTI through March 1999. In addition, we are
obligated to pay RTI a royalty of 6.5% of gross revenues we
receive from products derived from the licensed technology and
from sublicensee proceeds and to make the following minimum
royalty payments following the first commercial sale of such
products: $15,000, $30,000 and $60,000 during each of the first,
second and each successive year thereafter, respectively. We
must use commercially reasonable efforts to develop products
related to the licensed technology and to meet certain
performance milestones. No payments to RTI are required in
connection with meeting these performance milestones.

The license agreement expires on the date of expiration of the
last patent licensed under the agreement or upon 120 days
written notice by either party to the other. The parties also
may terminate the license agreement for cause upon a material
breach or default by the other party, subject to prior notice to
and an opportunity to cure by the offending party. Upon
termination of the license agreement by RTI for cause, all
licensed rights revert to RTI, subject to our limited right to
use the licensed technology for a six-month transition period
following termination of the license agreement. Accordingly, our
failure to perform our obligations under the RTI Agreement in
the future could result in termination of the license, and loss
of our right to use this technology.

We do not currently plan to commercialize DOPASCAN®
Injection in the United States.

In addition to the RTI Agreement, we have entered into
sublicense agreements with MAP and DRL for the development and
commercialization of DOPASCAN® Injection in Europe and
Japan, respectively, and with MNI for the use of DOPASCAN®
Injection for research purposes, the existence and terms of
which for each sublicense agreement we do not believe are
material to our business.

GPI
1485/Neuroimmunophilin Ligand Program

We have entered into exclusive worldwide license agreements with
Johns Hopkins, to patents covering the neurotrophic use of
neuroimmunophilin ligands. These agreements require us to
reimburse Johns Hopkins for costs associated with preparing,
filing, maintaining and prosecuting their patents. The
agreements also required us to make approximately $70,000 in an
up-front payment and an annual maintenance fee of $5,000. In
addition, we are required to make the following milestone
payments under these agreements: $100,000 upon the first U.S.
IND for a licensed product and $200,000 upon the first FDA
approval for commercial sale of a licensed product. We are also
required to pay a royalty of 3% on net sales on licensed
products and of 2% on any proceeds we receive from sublicenses
of licensed products. Further, we are required to expend at
least $100,000 per year to develop the licensed products. No
milestone payments have been paid by us to Johns Hopkins under
this license agreement. Amgen, our former corporate partner
under this license agreement, paid a milestone payment of
$100,000 to Johns Hopkins upon receipt of the first U.S. IND for
a licensed product.

For a particular country, the license agreements expire on the
date of expiration of the last patent licensed in that country,
or if no patents have been issued in that country, in 2018. The
parties also may terminate the license agreements for cause upon
a material breach or default by the other party, subject to
prior notice to and an opportunity to cure by the offending
party. In the event of termination of these licenses, we would
lose our rights to use the licensed technology.

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PPE Program

In June 1996, we entered into a license agreement with MIT and
Johns Hopkins regarding a patent application covering
biodegradable polymers for use in connection with the controlled
local delivery of certain chemotherapeutic agents (including
paclitaxel (TAXOL®) and camptothecin). Under this
agreement, we are obligated to make certain annual and milestone
payments to MIT and to pay royalties based on any sales of
products incorporating the technology licensed to us.
Furthermore, under the terms of the agreement, we have committed
to spend minimum amounts to develop the technology and to meet
certain development milestones, including filing a New Drug
Application for this technology by June 25, 2006. Our
failure to perform these obligations could result in losing our
rights to such technology. In addition, the underlying patents
are subject to march-in rights of the U.S.
government described below.

In July 1996, we entered into a license agreement with Johns
Hopkins that currently covers several U.S. patents respecting
certain PPEs developed at Johns Hopkins and patent applications
for additional PPEs. This agreement, among other things,
requires us to pay certain processing, maintenance and/or
up-front fees, milestone payments and royalties, a portion of
proceeds from sublicenses, and fees and costs related to patent
prosecution and maintenance and to spend minimum yearly amounts
for, and meet deadlines regarding development of this
technology, including filing a New Drug Application for this
technology by July 18, 2006. If we fail to meet these
requirements, the agreement could be terminated. In the event of
termination of these licenses, we would lose our rights to the
use of the licensed technology. In addition, the underlying
patents are subject to march-in rights of the U.S. government.

As previously mentioned, we have discontinued our PPE Program
and are not pursuing further the development and
commercialization of the patent rights granted to us under the
foregoing license agreements. Accordingly, our only on-going
obligation under these licenses is for the payment of certain de
minimis patent maintenance costs.

United States Government
Rights

Aspects of the technology licensed by us under agreements with
third party licensors may be subject to certain government
rights (sometimes referred to as march-in rights).
Government rights in inventions conceived or reduced to practice
under a government-funded program (subject
inventions) may include a non-exclusive, royalty-free
worldwide license to practice or have practiced such inventions
for any governmental purpose. In addition, the U.S. government
has the right to require us to grant licenses which shall be
exclusive under any of such inventions to a third party if they
determine that: (i) adequate steps have not been taken to
commercialize such inventions; (ii) such action is
necessary to meet public health or safety needs; or
(iii) such action is necessary to meet requirements for
public use under federal regulations. The U.S. government also
has the right to take title to a subject invention if there is a
failure to disclose the invention and elect title within
specified time limits. In addition, the U.S. government may
acquire title in any country in which a patent application is
not filed within specified time limits. Federal law requires any
licensor of an invention that was partially funded by the
federal government to obtain a covenant from any exclusive
licensee to manufacture products using the invention
substantially in the United States. Further, the government
rights include the right to use and disclose, without
limitation, technical data relating to licensed technology that
was developed in whole or in part at government expense. Some of
our principal technology license agreements contain provisions
recognizing these government rights.

Competition

We compete with other pharmaceutical companies to provide
pharmaceutical products to the hospital and neurology markets.
We are involved in technological fields in which developments
are expected to continue at a rapid pace. Our success depends
upon our ability to compete effectively in the research,
development and commercialization of products and technologies
in our areas of focus. Competition from pharmaceutical, chemical
and biotechnology companies, universities and research
institutes is intense and expected to increase. Many of these
competitors have substantially greater research and development
capabilities and experience and greater manufacturing,
marketing, financial and managerial resources than we

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We are aware of several competing approaches for the treatment
of malignant glioma, including using radioactive seeds for
interstitial radiotherapy, increasing the permeability of the
blood-brain barrier to chemotherapeutic agents, sensitizing
cancer cells to chemotherapeutic agents using gene therapy and
developing chemotherapeutics directed to specific receptors in
brain tumors. Furthermore, our patent protection for
GLIADEL® Wafer ends in 2006. At that time, others may try
to copy the wafer and enter the market as a generic drug through
applicable FDA procedures.

There are two other GP IIb/IIIa inhibitors that compete with
AGGRASTAT® Injection: INTEGRELIN® Injection; and
ReoPro®. ReoPro®, which is marketed by Eli Lilly, was
the first to come to market and is used predominantly at the
time of percuteaneous coronary intervention (PCI). Currently,
ReoPro has about a 30% dollar share of the IIb/IIIa market.
INTEGRELIN® Injection, which is marketed through a
co-promotion between Millennium and Schering, has a broader
indication than ReoPro® allowing the product to be used
both at the time of PCI, as well as prior to PCI.
INTEGRELIN®Injection is currently the market leader in the
IIb/IIIa market with approximately 60% of the dollar share. In
some medical institutions, Angiomax® is being used as a
replacement for IIb/IIIa inhibitors in PCI but that use is
generally limited to low-risk and elective PCI patients.

A number of companies have shown interest in trying to develop
neurotrophic agents to promote nerve growth and repair in
neurodegenerative disorders and traumatic central nervous system
injuries. Most of these activities have focused on naturally
occurring growth factors. These factors contain large molecules
that generally cannot cross the blood-brain barrier and thus
present problems in administration and delivery. We are aware of
several companies that are investigating small molecule
neurotrophic compounds for peripheral neuropathy in the clinic.

There is intense competition to develop an effective and safe
neuroprotective drug or biological agent. Calcium channel
antagonists, calpain inhibitors, adenosine receptor antagonists,
free radical scavengers, superoxide dismutase inducers,
proteoloytic enzyme inhibitors, phospholipase inhibitors and a
variety of other agents are under active development by others.

The anesthesia/sedation field is concentrated in the United
States mainly among four major companies (Baxter International
Inc., Abbott Laboratories, AstraZeneca PLC, and Jones Pharma
Inc.), with several other companies doing research in the field.
There are numerous products currently on the market that are
accepted as relatively safe and effective anesthetic agents and
sedation agents. In addition, we are aware of several companies
that are seeking to develop water soluble formulations of
propofol. We cannot be sure that we can successfully develop
AQUAVAN® Injection into a safe and effective drug or that
it will be cleared for marketing. Even if we are able to market
AQUAVAN® Injection, the commercial prospects for it will
depend heavily on its safety and efficacy profile relative to
alternatives then available in the market.

Although our PACLIMER® Microspheres and Lidocaine-PE
Microspheres are based on a proprietary polymer system, this
technology could compete with other developing and existing drug
delivery technologies. We are aware of several other companies
that are seeking to develop sustained release injectable
products for pain, including post-surgical pain. Additionally,
other companies are engaged in the development of improved
formulations of paclitaxel.

We believe that at least two other companies are clinically
evaluating imaging agents for dopamine neurons. In addition, a
variety of radiolabeled compounds for use with Positron Emission
Tomography (PET) scanners have been used to image dopamine
neurons successfully in patients with Parkinsons disease.
PET scanning is currently only available in a limited number of
hospitals in the United States and Europe.

Any product candidate that we develop and for which we gain
regulatory approval, including GLIADEL® Wafer, must then
compete for market acceptance and market share. For certain of
our product candidates, an important factor will be the timing
of market introduction of competitive products. Accordingly, the
relative speed with which we and competing companies can develop
products, complete the clinical testing and

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Research and Development Expenses

Our research and development expenses were $33.6 million,
$46.1 million, and $54.3 million for the years ended
December 31, 2003, 2002 and 2001, respectively. These
expenses were divided between our research and development
platforms in the following manner:

|                            |  |                         |      |      |  |      |      |  |  |   |      | 
|--------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                            |  |                        
|                            |  | Years ended December 31
|                            |  |                        
|                            |  | 2003                    |      | 2002 |  | 2001
|                            |  |                         |      |      |  |     
|                            |  |                        
|                            |  | ($ in millions)        
|                           
|                           
|                           
|                           
|Pharmaceutical technologies |  | $                       | 21.8 |      |  | $    | 20.8 |  |  | $ | 24.5 | 
|                           
|                           
|                           
|                           
|Biopolymer technologies     |  |                         | 1.4  |      |  |      | 5.0  |  |  |   | 8.6  | 
|                           
|                           
|                           
|                           
|Indirect expenses           |  |                         | 10.4 |      |  |      | 20.3 |  |  |   | 21.2 | 
|                            |  |                         |      |      |  |      |      |  |  |   |      | 
|                            |  | $                       | 33.6 |      |  | $    | 46.1 |  |  | $ | 54.3 | 
|                            |  |                         |      |      |  |      |      |  |  |   |      | 

Beginning in fiscal year 1999, we began recording research and
development costs under two platforms, pharmaceutical
technologies and biopolymer technologies. From January 1,
1999, through December 31, 2003, we incurred, in the
aggregate, costs of $104.9 million for our pharmaceutical
technologies platform, $34.1 million for our biopolymer
technologies platform, and $83.8 million of indirect
expenses. From our inception in July 1993 through
December 31, 1998, we incurred a total of
$100.4 million in direct and indirect research and
development costs relating to pharmaceutical and biopolymer
technologies.

Pharmaceutical
Technologies

Our pharmaceutical technologies research and development costs
increased in 2003 compared to 2002 due to increased expenditures
of $3.8 million in connection with further clinical
development of GPI 1485, our lead neuroimmunophilin ligand
compound. This increased spending was partially offset by
reduced expenditures of $2.2 million in our AQUAVAN®
project as we incurred preparation and initiation costs in 2002
which related to the Phase II colonoscopy clinical trial in
progress during fiscal year 2003. Additionally, in 2002, we made
a $0.8 million milestone payment to ProQuest, the licensor
of the AQUAVAN® technology.

Our pharmaceutical technology research and development expenses
decreased in 2002, compared to 2001, primarily due to a decrease
in expenses in our NAALADase inhibitor program resulting from
the completion of our Phase I clinical trials of
GPI 5693 (a lead NAALADase inhibitor compound). The
decrease in spending on our NAALADase inhibitors was partially
offset by an increase in spending on our FKBP neuroimmunophilin
ligand technology and our AQUAVAN® Injection program.

Biopolymer
Technologies

Our biopolymer technology research and development expenses
decreased in 2003 compared to 2002 due to a decision made as
part of the corporate restructuring in the third quarter of 2002
to focus our research and development activities on our
pharmaceutical technologies. Currently, we do not plan to
conduct additional research or clinical testing on our
biopolymer technologies; instead we are pursuing strategic
alternatives to further develop these technologies.

Our biopolymer technology research and development expenses
decreased in 2002, compared to 2001, due to a decrease in
expenses incurred in connection with the clinical development of
both PACLIMER®

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Indirect Expenses

Our indirect research and development expenses decreased in the
year ended 2003 compared to 2002 primarily as a result of the
full year impact of the restructuring efforts taken in the third
quarter of 2002. Of this decrease, $4.3 million related to
the reduction in employee costs, $4.1 million in facility
and equipment expenses, and the remainder related to certain
non-core project and other indirect costs. Our indirect research
and development expenses decreased for the year ended 2002
compared to 2001 as a result of the reduced workforce and the
associated overhead costs.

Product Liability and Insurance

Product liability risk is inherent in the testing, manufacture,
marketing and sale of GLIADEL® Wafer, AGGRASTAT®
Injection and our product candidates, and there can be no
assurance that we will be able to avoid significant product
liability exposure. We have primary product liability coverage
of $5 million and excess coverage of $5 million for a
total of $10 million in liability insurance coverage,
covering clinical trials and product sales. There can be no
assurance that this or any future insurance coverage obtained by
us will be adequate or that claims will be covered by our
insurance. Our insurance policies provide coverage on a
claims-made basis and are subject to annual renewal. Product
liability insurance varies in cost, can be difficult to obtain
and may not be available to us in the future on acceptable
terms, or at all.

Employees

At December 31, 2003, we employed 266 individuals. Of these
266 employees, 144 were employed in the areas of research and
product development, the quality control of AGGRASTAT®
Injection and in the manufacturing and quality control of
GLIADEL® Wafer. The remaining 122 employees performed
selling, general and administrative functions, including sales
and marketing, executive, finance and administration, legal and
business development. None of our employees are currently
represented by a labor union. To date, we have not experienced
work stoppages related to labor issues and we believe our
relations with our employees are good.

Hiring and retaining qualified personnel are important factors
for our future success. There can be no assurance that we will
be able to continue to hire qualified personnel and, if hired,
that we will be able to retain these individuals.

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PART IV






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules, and Reports on
    Form 8-K

The following exhibits are filed herewith:

|        |       |             |  |                                                                                                                                                                                                                
|------- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 10.22 |             |  | Distribution Agreement, dated September 27,
    2001, between the Company and National Specialty Services, Inc,
    including exhibits (filed herewith)                                                        
|        | 31.01 |             |  | Certification of Chief Executive Officer Pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of 1934
    as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 (filed herewith)
|        | 31.02 |             |  | Certification of Chief Financial Officer Pursuant
    to Rule 13a-14(a) under the Securities Exchange Act of 1934
    as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 (filed herewith)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |                              
| | -----------------------------
| | GUILFORD PHARMACEUTICALS INC.



| |     |                         
| | --- | ------------------------
| | By: | /s/ CRAIG R. SMITH, M.D.

| |                                                
| | -----------------------------------------------
| |                                                
| | Craig R. Smith, M.D.                           
| | Chairman, President and Chief Executive Officer

Date: April 9, 2004

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