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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-K

|                                            |  |                                                                                             
|------------------------------------------- |  | --------------------------------------------------------------------------------------------
|                                            |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        THE SECURITIES EXCHANGE ACT OF 1934
|                                            |  |                                                                                             
|For the fiscal year ended December 31, 2000
|                                            |  |                                                                                             
|Commission File Number: 0-23736            



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GUILFORD PHARMACEUTICALS INC.



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

6611 Tributary Street

Baltimore, Maryland 21224


(410) 631-6300




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 
     No

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.

As of March 26, 2001, the aggregate value of the
approximately 25,685,111 shares of common stock of the
Registrant issued and outstanding on such date, excluding
approximately 918,227 shares held by all affiliates of the
Registrant, was approximately $410,961,776. This figure is based
on the closing sales price of $16.00 per share of the
Registrants common stock as reported on the Nasdaq®
National Market on March 26, 2001.

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:

Portions of the 2000 Annual Report to Stockholders are
incorporated by reference into Part II. Portions of the
Notice of Annual Meeting and Proxy Statement to be filed no
later than 120 days following December 31, 2000 are
incorporated by reference into Part III.



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TABLE OF CONTENTS



|                                                   |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                            
|                                                   | Item 1. Business                                                                             
|                                                   | Item 1A. Executive Officers and Other Significant Employees of Registrant                    
|                                                   | Item 2. Properties.                                                                          
|                                                   | Item 3. Legal Proceedings                                                                    
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 4A. Risk Factors                                                                        
|PART II                                           
|                                                   | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|                                                   | Item 6. Selected Consolidated Financial Data                                                 
|                                                   | Item 7. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                                   | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|                                                   | Item 8. Financial Statements and Supplementary Data                                          
|                                                   | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                                          
|                                                   | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                   | Item 11. Executive Compensation                                                              
|                                                   | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                   | Item 13. Certain Relationships and Related Transactions                                      
|                                                   | PART IV                                                                                      
|                                                   | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|EX-3.02 Amended and Restated Bylaws               
|EX-10.63 Employment Letter Agreement              
|EX-10.64 Employment Letter Agreement              
|EX-13.01  Portions of Company's 2000 Annual Report
|Consent of KPMG LLP                               



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PART I

From time to time in this annual report we may make
statements that reflect our current expectations regarding our
future results of operations, economic performance, and
financial condition, as well as other matters that may affect
our business. In general, we try to identify these
forward-looking statements by using words such as
anticipate, believe, expect,
estimate, and similar expressions.

While these statements reflect our current plans and
expectations, and we base the statements on information
currently available to us, we cannot be sure that we will be
able to implement these plans successfully. We may not realize
our expectations in whole, or in part, in the future.

The forward-looking statements contained in this annual
report may cover, but are not necessarily limited to, the
following topics: (1) the consequences of our reacquisition
of the worldwide marketing, sale and distribution rights to
GLIADEL® Wafer from Aventis Pharmaceuticals Products
Inc. (Aventis); (2) our efforts to market, sell
and distribute GLIADEL® Wafer in the United States
and internationally; (3) our efforts to expand the labeled
uses for GLIADEL® Wafer, including our efforts to
obtain additional United States and international regulatory
clearances based on the results of the Phase III first
surgery trial reported last fall; (4) our efforts to
develop polymer drug delivery product line extensions and new
polymer drug delivery products; (5) our research programs
related to our FKBP neuroimmunophilin ligand technology
partnered with Amgen Inc. (Amgen), NAALADase
inhibition, PARP inhibition, polymer drug delivery (including
LIDOMER Microspheres) and other technologies;
(6) our clinical development activities, including the
commencement and conducting of clinical trials, related to our
polymer-based drug delivery products and product candidates
(including GLIADEL® Wafer and PACLIMER®
Microspheres) and our pharmaceutical product candidates,
including NIL-A (partnered with Amgen), GPI 5693 (our lead
NAALADase inhibitor), AQUAVAN Injection (our novel
prodrug of propofol) and any future lead compounds in our PARP
program; (7) our efforts to scale-up product candidates
from laboratory bench quantities to commercial quantities;
(8) our efforts to secure adequate supply of the active
pharmaceutical ingredients for clinical development and
commercialization; (9) our efforts to manufacture drug
candidates for clinical development and eventual commercial
supply; (10) our strategic plans; (11) anticipated
expenditures and the potential need for additional funds; and
(12) specific guidance we give in the section entitled
Outlook, regarding our current expectations of our
future operating results.

All of these items involve significant risks and
uncertainties. Any of the statements we make in this annual
report that are forward-looking are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995. We wish to caution you that our actual results may
differ significantly from the results we discuss in the
forward-looking statements.

We discuss factors that could cause or contribute to such
differences in the Risk Factors section of this
annual report. In addition, any forward-looking statements we
make in this document speak only as of the date of this
document, and we do not intend to update any such
forward-looking statements to reflect events or circumstances
that occur after that date.




Item 1.  Business

Overview

We are a biopharmaceutical company engaged in the development
and commercialization of novel products in two principal areas:
(1) targeted and controlled drug delivery systems using
proprietary biodegradable polymers for the treatment of cancer
and other diseases; and (2) therapeutic and diagnostic
products for neurological diseases and conditions.

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Product and Development Programs

The following table summarizes the current status of our
product, product candidates and research programs:

|                                                        |  |                                                                                                                                               |  |                                            |  |                                           
|------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ |  | ------------------------------------------
|                                                       
|                                                       
|Program/ Product Candidates                             |  | Disease Indications/                                                                                                                          |  |                                           
|Drug Delivery Business                                  |  | Conditions                                                                                                                                    |  | Status(1)                                  |  | Corporate Partner                         
|                                                       
|GLIADEL® Wafer (3.85% BCNU)                             |  | Recurrent glioblastoma multiforme                                                                                                             |  | Market                                     |  | Orion Corporation Pharma(2)               
|                                                       
|                                                        |  | Malignant glioma at time of initial surgery                                                                                                   |  | Market approval to be considered by FDA(3) |  | Orion Corporation Pharma(2)               
|                                                       
|PACLIMER® Microspheres (paclitaxel in PPE microspheres) |  | Ovarian cancer                                                                                                                                |  | Phase I/II                                 |  |                                          
|                                                       
|PACLIMER® Microspheres (paclitaxel in PPE microspheres) |  | Lung, prostate and head & neck cancer                                                                                                         |  | Pre-clinical                               |  |                                          
|                                                       
|LIDOMERTMMicrospheres                                   |  | Post-surgical pain                                                                                                                            |  | Pre-clinical                               |  |                                          
|                                                       
|Neurological Products Program                           |  |                                                                                                                                               |  |                                            |  |                                           
|                                                       
|Neurotrophic Drugs                                      |  |                                                                                                                                               |  |                                            |  |                                           
|                                                       
|NIL-A                                                   |  | Parkinsons disease                                                                                                                           |  | Phase II                                   |  | Amgen                                     
|                                                       
|Other FKBP neuroimmunophilin ligands                    |  | Alzheimers disease, traumatic brain injury, traumatic
	spinal cord injury, multiple sclerosis, neuropathy, stroke and
	others                |  | Pre-clinical                               |  | Amgen                                     
|                                                       
|Other neurotrophic and cytoprotective small molecules   |  | Alzheimers disease, traumatic brain injury, traumatic
	spinal cord injury, multiple sclerosis, neuropathy, stroke and
	other ischemic damage |  | Research                                   |  |                                          
|                                                       
|Neuroprotective Drugs                                   |  |                                                                                                                                               |  |                                            |  |                                           
|                                                       
|GPI-5693                                                |  | Neuropathic pain and disease modification for diabetic neuropathy                                                                             |  | Phase I                                    |  |                                          
|                                                       
|Other NAALADase inhibitors                              |  | Other neuroprotective indications (such as ALS, glaucoma and
	stroke)                                                                         |  | Research                                   |  |                                          
|                                                       
|PARP inhibitors                                         |  | Stroke, peripheral ischemia, septic shock, inflammation                                                                                       |  | Pre-clinical                               |  |                                          
|                                                       
|Anesthetic/Sedation Agent                               |  |                                                                                                                                               |  |                                            |  |                                           
|                                                       
|AQUAVANTMInjection                                      |  | Surgical anesthesia/ sedation                                                                                                                 |  | Phase I                                    |  |                                          
|                                                       
|Diagnostic Imaging Agent                                |  |                                                                                                                                               |  |                                            |  |                                           
|                                                       
|DOPASCAN® Injection                                     |  | Imaging agent to diagnose and monitor Parkinsons disease                                                                                     |  | Phase III                                  |  | Daiichi Radioisotope Laboratories, Ltd.(4)
|                                                       

GLIADEL® Wafer, DOPASCAN® Injection, and
PACLIMER® Microspheres are registered trademarks of ours.
TAXOL® is a registered trademark of Bristol-Myers Squibb
Company.






|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Research includes initial research related to
	specific molecular targets, synthesis of new chemical entities,
	and assay development for the identification of lead compounds.
	Pre-clinical

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|    |                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | includes testing of lead compounds in vitro and in animal
	models, pharmacology and toxicology testing, product formulation
	and process development prior to the commencement of clinical
	trials.                                                             
|   
|(2) | Orion Corporation Pharma (formerly Orion Corporation Farmos) is
	our corporate partner for GLIADEL® Wafer in Scandinavia.                                                                                                                                       
|   
|(3) | We plan to file a Supplemental New Drug Application for this
	indication during the second quarter of 2001.                                                                                                                                                     
|   
|(4) | Daiichi Radioisotope Laboratories, Ltd., or DRL, is our
	corporate partner for DOPASCAN® Injection in Japan, Korea
	and Taiwan. DRL has informed us that they will commence
	Phase III clinical investigations in Japan with
	DOPASCAN® Injection later in 2001.

Our effort to develop and commercialize GLIADEL® Wafer and
our other product candidates are subject to numerous risks and
uncertainties. Certain of these risks are set forth under the
section of this annual report captioned Risk
Factors, as well as elsewhere in this annual report.

Drug Delivery Business

We are a leader in the targeted and controlled delivery of drugs
using biodegradable polymers. Delivering high drug
concentrations locally for a sustained period of time may
increase the efficacy of cancer chemotherapy in slowing tumor
growth and/ or reducing tumor mass and may decrease the side
effects associated with systemic administration. Our lead
product delivers the cancer chemotherapeutic, BCNU and is used
to treat a type of brain cancer called glioblastoma multiforme
as second line therapy. Until last year, our former corporate
partner, Aventis, was responsible for marketing the product in
the U.S. and most other countries. In January 2001, we began
marketing the product ourselves in the U.S. and initially
through distributors elsewhere, and are seeking regulatory
approval for use of GLIADEL® Wafer as first line therapy. A
second generation polymer product candidate delivering
paclitaxel (also known under the brand name TAXOL®) is
being studied in the clinic against ovarian cancer. We are doing
pre-clinical work with PACLIMER® Microspheres in additional
cancer indications. We expect to start a clinical trial
investigating LIDOMER Microspheres, a polymer delivering
lidocaine, a commonly used analgesic, for post-operative pain by
late 2001.

GLIADEL® Wafer

Our first product in our drug delivery business is GLIADEL®
Wafer, a novel treatment for glioblastoma multiforme (or GBM).
GBM grows rapidly, is universally fatal, and is the most common
form of primary brain cancer. GLIADEL® Wafer is a
proprietary biodegradable polymer product that contains the
cancer chemotherapeutic drug BCNU (carmustine). Up to eight
GLIADEL® Wafers are implanted in the cavity created when a
neurosurgeon removes a brain tumor. The wafers gradually erode
from the surface and deliver BCNU directly to the tumor site in
high concentrations for an extended period of time without
exposing the rest of the body to the toxic side effects of BCNU.

In October 1995, we entered into an agreement with Orion
Corporation Pharma (Orion Pharma), a major
Scandinavian health care company, for the marketing, sales and
distribution of GLIADEL® Wafer in Scandinavia. Under this
agreement, Orion Pharma purchases GLIADEL® Wafer from
us on an exclusive basis for sale in Scandinavia.
Orion Pharma commenced sales of GLIADEL® Wafer in
Scandinavia in 1997 on a named hospital basis.

In 1996, the U.S. Food and Drug Administration approved
GLIADEL® Wafer for use as an adjunct to surgery to prolong
survival in patients with recurrent GBM for whom surgery is
indicated. Also in 1996, we entered into agreements with Aventis
(then Rhône-Poulenc Rorer) granting Aventis marketing
rights to GLIADEL® Wafer in the U.S. and clinical
development and marketing rights in

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In October 2000, we entered into an agreement to reacquire
Aventis rights in GLIADEL® Wafer for
300,000 shares of our common stock then valued at
approximately $8 million. Under this agreement, Aventis
continued to market GLIADEL® Wafer for a transition period
ending December 31, 2000. Since January 1, 2001, we
have been responsible for the marketing, sales and distribution
of GLIADEL® Wafer except in Scandinavia, where the product
continues to be sold by Orion Pharma. Since the
reacquisition of Aventis right in GLIADEL® Wafer, we
have built a commercial operations function, consisting of
approximately 10 internal marketing and sales management,
reimbursement and managed care specialists, medical affairs,
professional services and customer service personnel, and an
approximately 22-person external sales force through Cardinal
Sales and Marketing Services, a contract sales organization
(Cardinal Health).

During the time that Aventis owned the development and marketing
rights to GLIADEL® Wafer, Aventis obtained regulatory
approval for the product in over 21 countries, including
France, Germany, the United Kingdom, Spain, Canada, South Korea
and Israel.

In November 2000, we announced the results of a Phase III
clinical trial investigating the administration of GLIADEL®
Wafer at the time of initial surgery for the treatment of
malignant glioma. The 240-person trial was a randomized,
double-blind, placebo-controlled study conducted at 38 centers
in 14 countries. Based on the results of this study, we
expect to file a Supplemental New Drug Application with the FDA
in the second quarter of 2001, seeking approval to market
GLIADEL® Wafer for first line therapy in patients newly
diagnosed with malignant glioma.

During 2000, the Company received $2 million in milestone
payments from Aventis as a result of obtaining regulatory
approval for GLIADEL® Wafer in the U.K. and Spain. In
addition, the Company received $1.5 million in transfer
payments for supply of the product from Aventis and
$2.4 million in royalties on Aventis sales to
hospitals and other end-users.

The Company pays a royalty to Massachusetts Institute of
Technology (MIT) on sales of GLIADEL® Wafer pursuant to the
license agreement under which the Company acquired the
underlying technology for this product. During 2000, the Company
paid $0.2 million in royalties to MIT.

Future sales of GLIADEL® Wafer are subject to certain risks
and uncertainties. A number of these risks are discussed in
detail in the section of this annual report entitled Risks
Factors.

PACLIMER® Microspheres

We are working to broaden our line of polymer-based oncology
products through the use of other chemotherapeutic agents,
different polymer systems and various formulations. In November
1999, we filed an Investigational New Drug application with the
FDA, or an IND, for the intraperitoneal
administration of our second generation polymer oncology
product, PACLIMER® Microspheres, in women with ovarian
cancer. PACLIMER® Microspheres are a site-specific,
controlled release formulation of paclitaxel (TAXOL®) in a
proprietary biodegradable polymer called a polyphosphoester (or
PPE) developed in collaboration with scientists at
Johns Hopkins. We are conducting a Phase I/II clinical
trial in association with the Gynecologic Oncology Group, a
consortium of leading academic clinical investigators in the
field. We are also engaged in research on the suitability of
this site-specific, controlled release formulation of paclitaxel
for other local cancers, such as tumors of the lung, head and
neck, and prostate.

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We are the exclusive licensee from MIT and Johns Hopkins of
several issued U.S. patents relating to the use of polymers
to deliver paclitaxel and certain other chemotherapeutic agents
to solid tumors. In addition, we have applied for a number of
patents in the U.S. and abroad relating to the composition
of matter of PPEs and their use for various kinds of cancer,
including ovarian cancer.

LIDOMER Microspheres

We are also exploring the use of our proprietary biodegradable
polymer platform to deliver other agents which may have
therapeutic utility. We are currently engaged in pre-clinical
research for LIDOMER Microspheres, with the hope of
entering the clinic by late 2001. LIDOMER Microspheres are
a site-specific, controlled release formulation of the widely
used local anesthetic, lidocaine. We intend to target
LIDOMER Microspheres for the relief of post-surgical pain.

Neurological Products Program

We are also a leader in the research and development of small
molecules that regenerate damaged nerves (our
neurotrophic program) or protect nerves from damage (our
neuroprotectant program) for potential treatment of a range of
neurodegenerative diseases and conditions, such as
Parkinsons disease, Alzheimers disease, stroke,
Amyotrophic Lateral Sclerosis (ALS), multiple sclerosis, spinal
cord injury and peripheral neuropathies. Additionally, we are
currently in Phase I clinical trials with AQUAVAN
Injection, a novel prodrug of propofol, a widely-used
anesthetic. We are also continuing our efforts to seek partners
to continue development of our DOPASCAN® Injection imaging
agent for the diagnosis and monitoring of Parkinsons
disease. In addition, we are investigating small molecule
therapeutics for certain other neurological conditions.

Neurotrophic Program

The Companys neurotrophic program originated from
observations first made in the laboratory of Dr. Solomon
Snyder, Director of the Department of Neuroscience at Johns
Hopkins, that certain intracellular proteins, known as
immunophilins, which are targets of
immunosuppressant drugs such as FK 506, 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
the neurotrophic effects of certain immunosuppressant drugs and
other immunophilin ligands 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. Our
scientists have synthesized a large number of proprietary small
molecules, called neuroimmunophilin ligands, which
are neurotrophic 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 result from the
collaboration for all human therapeutic and diagnostic
applications. Amgen initially paid us a one time, non-refundable
signing fee of $15 million in 1997 and an additional
$20 million for 640,095 shares of our common stock and
five-year warrants to purchase up to an additional
700,000 shares of our common stock at an exercise price of
$35.15 per share. From October 1997, through September
2000, Amgen also paid $13.5 million to support our research
relating to the FKBP neuroimmunophilin ligand technology.

If Amgen achieves certain specified development objectives in
each of ten different clinical indications, Amgen has agreed to
pay us up to a total of $392 million in milestone payments.
To date, we have earned milestone payments from Amgen in the
amount of $6 million. We will also receive royalties on any
future sales of products resulting from the collaboration. Drug
development is a risky endeavor, however, and Amgen may not
succeed in developing any FKBP neuroimmunophilin

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During 1998, Amgen nominated a neuroimmunophilin ligand, called
NIL-A, as the lead compound in the program,
initially targeting Parkinsons disease. During 1999, Amgen
commenced human trials with NIL-A, focusing on safety,
tolerability and pharmacokinetic study in healthy subjects, and
filed an Investigational New Drug (IND) application with the
U.S. Food and Drug Administration. NIL-A entered Phase II
testing in patients with Parkinsons disease during 2000.

Amgen and we are also currently conducting pre-clinical research
for the use of FKBP neuroimmunophilin compounds for other
clinical indications, including Alzheimers disease,
traumatic brain injury, traumatic spinal cord injury, multiple
sclerosis, neuropathy and stroke.

To date, we have been granted or have obtained rights to more
than 30 U.S. patents relating to our neuroimmunophilin compounds
program, including a broad use patent claiming the use of
compounds having an affinity for FKBP to stimulate growth of
damaged neurons in patients suffering from Parkinsons
disease, Alzheimers disease or physical damage to the
spinal cord.

Further, we are engaged in pre-clinical research and development
of other small molecule neutrophic compounds in addition to
those that are the subject of our collaboration with Amgen.

As noted in the Risk Factors section and elsewhere
in this annual report, there is no guarantee that we or Amgen
will be able to successfully develop NIL-A, other
neuroimmunophilin compounds or other product candidates into
safe and effective drugs for neurological or other uses.
Consequently, we may not earn additional milestone payments
related to Amgens development activities or revenues
related to product sales.

Neuroprotectant Program

In our neuroprotectant program, our scientists are developing
novel compounds to protect brain cells from ischemia (the lack
of oxygen delivery from reduced blood flow) and other disorders
caused by massive release of excitatory amino acid
neurotransmitters such as glutamate. We have been exploring
distinct intervention points in a biochemical pathway that can
lead to neuronal damage, including: (i) pre-synaptic
inhibition of glutamate release by inhibiting the enzyme,
N-acetylated alpha-linked acidic dipeptidase
(NAALADase); and (ii) post-synaptic inhibition
of the enzyme, poly(ADP-ribose) polymerase (PARP).
In the first quarter of 2000, we licensed from
Dr. Snyders laboratory Serine Racemase, an enzyme
which plays a key role in the activation of an important
post-synaptic glutamate receptor, the N-Methyl D-Aspartate
(NMDA) receptor. We are working on the selective inhibition of
NAALADase, PARP, D-Serine Racemase and other enzymes in the
biochemical pathway to neuronal damage and death as possible
mechanisms for inhibiting the toxic effects of excess glutamate
in neurological diseases and conditions.

NAALADase Inhibitors

During 2000, our scientists identified a lead compound in our
NAALADase inhibitor program, GPI-5693. The initial therapeutic
target of GPI-5693 is neuropathic pain and disease modification
of diabetic neuropathy, a debilitating and progressive disorder
involving severe pain, sensitivity, tingling, weakness and
numbness in a patients extremities. It may affect close to
one million Americans, yet there is currently no therapy that is
approved in the United States to treat this disorder. In animal
models, we have demonstrated that treatment with GPI-5693 and
other NAALADase inhibitors can normalize pain sensitivity,
improve nerve conduction velocity (the speed at which a nerve
impulse travels), and promote re-myelination of peripheral
nerves. In December 2000, we initiated clinical

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To date, more than 20 U.S. composition of matter and use patents
have been issued relating to Guilfords NAALADase
inhibition program, including a broad use patent claiming the
use of NAALADase inhibitors generally for the treatment of
glutamate abnormalities (such as stroke, ALS and
Parkinsons disease), compulsive disorders, and prostate
cancer.

PARP Inhibitors

Our scientists and their academic collaborators were among the
first to investigate the use of PARP inhibitors for the
prevention of glutamate neurotoxicity. Studies by several
academic laboratories using mice that have been genetically
altered to possess no or greatly diminished PARP activity
suggest that the absence of PARP activity may reduce the area of
neuronal damage from stroke by up to 85%-90%, and the area of
heart muscle damage during a heart attack by about 40%. Some of
our prototype PARP inhibitors have achieved similar results in
preclincal models of stroke and heart attack in animals. In
addition, our scientists have achieved neuroprotective results
not only in transient ischemia models of stroke, but also in the
more rigorous permanent ischemia models of stroke.

We have identified a number of distinct chemical series of novel
PARP inhibitors with pre-clinical efficacy. In addition, we have
obtained results in animal experiments suggesting that PARP
inhibitors have potential utility in many therapeutic areas,
including myocardial ischemia, traumatic head injuries,
Parkinsons disease, septic shock, type I diabetes and
arthritis.

We have filed numerous patent applications in the U.S. and
abroad relating to novel compositions of matter and methods of
use with respect to PARP inhibitors. To date, we had rights to
two issued U.S. patents in the field, including one
generally claiming the use of PARP inhibitors for the prevention
of glutamate neurotoxicity.

AQUAVAN Injection

In the first quarter of 2000, we announced that we had licensed
from ProQuest Pharmaceuticals Inc. (ProQuest) rights
relating to a novel prodrug of a widely used anesthetic,
propofol. A prodrug is a compound that is metabolized in the
body into a drug. The prodrug, which we call AQUAVAN
Injection, is water-soluble and rapidly converts to propofol
upon intravenous administration in animal models. In contrast,
propofol is administered in a lipid emulsion, which can cause
complications, such as short shelf life, clogged IV tubing,
elevated blood lipids and a potentially higher incidence of
bacterial contamination. AQUAVAN Injection may offer
clinical benefit to patients both as an ICU sedating agent and
an anesthesia-induction drug.

Since we licensed AQUAVAN Injection from ProQuest, we have
filed regulatory submissions to commence clinical studies in
Europe and, in January 2001, began a Phase I trial. The
trial is a dose escalation study of AQUAVAN Injection in
healthy volunteers. We are working with anesthesiologists and
regulatory consultants to explore recommendations for further
clinical studies. Because AQUAVAN Injection is a prodrug
of an approved anesthetic, we anticipate reduced regulatory,
development and timing risks as compared with some of our other
programs.

As noted in the section herein captioned Risk
Factors and elsewhere in this annual report, there is no
assurance that we will be able to develop AQUAVAN
Injection into a safe and effective drug.

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Diagnostic Imaging Agent Program 
DOPASCAN® Injection

Our product candidate for the diagnosis and monitoring of
Parkinsons disease is administered intravenously in trace
quantities and allows physicians to obtain images and measure
the degeneration of dopamine neurons in the brain. Dopamine
neurons are highly concentrated in a specialized area of the
brain that degenerates in Parkinsons disease.
Parkinsons disease is a common neurodegenerative disorder
affecting more than 900,000 patients in the United States.

In its early stages, Parkinsons disease can be very
difficult to distinguish clinically from other diseases with
similar symptoms but which do not respond well or at all to
specific therapy for Parkinsons disease. Unfortunately,
there are no diagnostic tests currently marketed or commercially
available that can reliably detect the neuronal degeneration in
Parkinsons disease, and the typical delay between the
onset of symptoms and clinical diagnosis is more than two years.
The primary way to establish the diagnosis at present is through
repeated physician visits and the use of therapeutic trials of
drugs such as L-Dopa, which carry with them the risk of
unnecessary, sometimes severe side effects.

Following intravenous injections with DOPASCAN® Injection,
images of a subjects brain are obtained with a SPECT
camera and can identify the loss of dopamine neurons in the
brain. To date, over 2,000 patients have been imaged in the
United States and Europe using DOPASCAN® Injection. In a
multi-center Phase IIb clinical trial conducted by the
Parkinsons Study Group in the United States and completed
in 1997, DOPASCAN® Injection accurately differentiated
patients clinically diagnosed with a Parkinsonian disorder
(i.e., Parkinsons disease and progressive supranuclear
palsy) from subjects without a Parkinsonian disorder (e.g.,
essential tremor and healthy controls) with a high sensitivity
(98%) and specificity (97%). In addition, no serious adverse
events were attributed to DOPASCAN® Injection in this study.

There can be no assurance, however, that similar results will be
seen in any other clinical trials for DOPASCAN® Injection
that may be conducted in the future or that DOPASCAN®
Injection will be approved as a safe and effective FDA-cleared
diagnostic.

We have entered into an agreement with Daiichi Radioisotope
Laboratories, Ltd. (DRL), a leading Japanese
radiopharmaceutical company, to develop and commercialize
DOPASCAN® Injection in Japan, Korea and Taiwan. DRL has
informed us that it plans to commence Phase III clinical
trials in 2001. We have sought partners for the manufacture
and/or distribution of this product in other territories,
including the United States and Europe. However, to date, we
have not been able to enter into an arrangement with a
third-party manufacturer for the supply of DOPASCAN®
Injection on acceptable terms. Unless and until we come to an
agreement with a suitable manufacturer or corporate partner, the
development of DOPASCAN® Injection will be limited to the
activities of our Japanese partner.

Manufacturing and Raw Materials

We currently manufacture GLIADEL® Wafer using a proprietary
process at our 18,000 square foot manufacturing facility in
Baltimore, Maryland, which includes areas designated for
packaging, quality control, laboratory, and warehousing. The
manufacturing facility has been in operation since April 1995.
It was initially inspected by the FDA in October 1995, and was
re-inspected by the FDA in February 1999. Also, in October 1999,
we were inspected by the Medicines Control Agency, the United
Kingdoms regulatory authority. Our current facilities are
designed to enable us to produce up to 8,000 GLIADEL® Wafer
treatments (each consisting of eight GLIADEL® Wafers)
annually.

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In January 1998, we completed construction of an expansion of
our manufacturing facilities to allow for the additional
synthesis of the polyanhydride co-polymer used in the
manufacture of GLIADEL® Wafer. We also will be able to use
this facility to produce our newest proprietary biodegradable
polymers, the PPEs, in connection with the development of other
polymer-based products. In addition, our completed construction
of a second clean room facility in 1998, we expect could
increase our GLIADEL® Wafer manufacturing capacity to
20,000-30,000 treatments annually. We further expect this second
clean room facility will provide sufficient capacity to produce
any clinical supply of PPE polymer-based product candidates
needed in the future, including PACLIMER® Microspheres
which are currently under development for ovarian cancer.

We believe that the various materials used in GLIADEL®
Wafer are readily available and will continue to be available at
reasonable prices. Nevertheless, while we believe that we have
an adequate supply of BCNU, the active chemotherapeutic
ingredient in GLIADEL® Wafer, to meet current demand, any
interruption in the ability of the two current suppliers to
deliver this ingredient could prevent us from delivering the
product on a timely basis. We depend upon the availability of
certain single-source raw materials in its formulations, but we
are seeking alternate suppliers for most of these raw materials.
We cannot be sure that such sources can be secured successfully
on terms acceptable to us, or at all. Failure of any supplier to
provide sufficient quantities of raw material in accordance with
the FDAs current Good Manufacturing Practice (cGMP)
regulations could cause delays in clinical trials and
commercialization of products, including GLIADEL® Wafer.

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 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-marketing 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 expend time, money and effort in
production, recordkeeping and quality control to ensure that the
product meets applicable specifications and other requirements.
The FDA periodically inspects drug manufacturing facilities to
ensure compliance with its cGMP regulations. We were last
inspected in 1999. Failure to comply subjects the manufacturer
to possible FDA action, such as suspension of manufacturing,
seizure of the product or voluntary recall of a product. Adverse
experiences with the commercialized product must be reported to
the FDA. The FDA also may require the submission of any lot of
the product for inspection and may restrict the release of any
lot that does not comply with FDA regulations, or may otherwise
order the suspension of manufacture, voluntary recall or
seizure. Product approvals may be withdrawn if compliance with
regulatory requirements is not maintained or if problems
concerning safety or efficacy of the product occur following
approval.

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Full Clinical Testing Requirements

The steps required before a newly marketed drug may be
commercially distributed in the United States include:
(i) conducting appropriate preclinical 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. In
addition to obtaining FDA approval for each indication to be
treated with each product, each domestic drug manufacturing
establishment must register with the FDA, list its drug products
with the FDA, comply with the FDAs cGMP requirements and
be subject to inspection by the FDA. Foreign manufacturing
establishments distributing drugs in the United States also must
comply with cGMP requirements, register and list their products,
and are subject to periodic inspection by FDA or by local
authorities under agreement with FDA. The FDA also regulates
drug advertising and promotion as well as the distribution of
physician samples. Individual states also often impose licensing
requirements on drug manufacturers and distributors. 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 preclinical,
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 preclinical 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. Preclinical tests to support an FDA application
must be conducted in accordance with the FDA regulations
concerning Good Laboratory Practices (GLPs). The results of the
preclinical 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 will become 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

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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, metabolism and clinical
pharmacology. Phase II involves controlled tests in a
larger but still limited patient population to determine the
efficacy of the drug for specific indications, to determine
optimal dosage and to identify possible side effects and safety
risks. Phase II testing for an indication typically takes
at least from one and one-half to two and one-half years to
complete. If preliminary evidence suggesting effectiveness has
been obtained during Phase II evaluations, expanded
Phase III trials are undertaken to gather additional
information about effectiveness and safety that is needed to
evaluate the overall benefit-risk relationship of the drug and
to provide an adequate basis for physician labeling.
Phase III studies for a specific indication generally take
at least from two and one-half to five years to complete. There
can be no assurance that Phase I, Phase II or
Phase III testing will be completed successfully within any
specified time period, if at all, with respect to any of the
Companys product candidates.

Reports of results of the preclinical 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. User fee legislation now requires the submission in
fiscal year 2001 of $285,740 to cover the costs of FDA review of
a full NDA. Annual fees also exist for certain approved
prescription drugs and the establishments that make them. The
NDA typically includes information pertaining to the preparation
of drug substances, analytical methods, drug product
formulation, and details on the manufacture of finished product
as well as proposed product packaging and labeling. Submission
of an NDA does not assure FDA approval for marketing. In May
1999 the FDA published final regulations describing criteria
that the FDA will use to evaluate the safety and efficacy of
diagnostic radiopharmaceuticals like DOPASCAN® Injection.

The median FDA approval time is currently about 12 months,
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.

Confirmatory studies similar to Phase III clinical studies
may be conducted after, rather than before, FDA approval under
certain circumstances. The FDA may determine under its
expedited, accelerated, or fast-track provisions that previous
limited studies establish an adequate basis for drug product
approval, provided that the sponsor agrees to conduct additional
studies after approval to verify safety and effectiveness.
Treatment of patients not in clinical trials with an
experimental drug may also be allowed under a Treatment IND
before general marketing begins. Charging for an investigational
drug also may be allowed under a Treatment IND to recover
certain costs of development if various requirements are met.
These cost-recovery, treatment IND, and expedited, accelerated
or fast-track approval provisions are limited, for example, to
drug products (i) intended to treat AIDS or other serious
severely debilitating or life-threatening diseases especially
and that provide meaningful therapeutic benefit to patients over
existing treatments, (ii) that are for diseases for which
no satisfactory alternative therapy exists, or (iii) that
address an unmet medical need. No assurances exist that the
Companys product candidates will qualify for
cost-recovery, expedited,

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The full NDA process for newly marketed non-biological drugs,
such as those being developed by us, including FKBP
neuroimmunophilin ligand products and inhibitors of NAALADase
and PARP, 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.

Abbreviated Testing Requirements

The Drug Price Competition and Patent Term Restoration Act of
1984 (DPC-PTR Act) established abbreviated
procedures for obtaining FDA approval for many non-biological
drugs which are off-patent and whose marketing exclusivity has
expired. Applicability of the DPC-PTR Act means that a full NDA
is not required for approval of a competitive product.
Abbreviated requirements are applicable to drugs which are, for
example, either bioequivalent to brand-name drugs, or otherwise
similar to brand-name drugs, such that all the safety and
efficacy studies previously done on the innovator product need
not be repeated for approval. Changes in approved drug products,
such as in the delivery system, dosage form, or strength, can be
the subject of abbreviated application requirements. There can
be no assurance that abbreviated applications will be available
or suitable for our non-biological drug products, including our
efforts to develop a controlled-release formulation of the
chemotherapeutic agent, paclitaxel (TAXOL®) using our PPEs,
or that FDA approval of such applications can be obtained.

A five-year period of market exclusivity is provided for newly
marketed active ingredients of drug products not previously
approved and a three-year period for certain changes in approved
drug products for which reports of new clinical investigations
are essential for approval (other than bioequivalence studies).
A period of three years is available for changes in approved
products, such as in delivery systems of previously approved
products. Both periods of marketing exclusivity mean that
abbreviated applications, which generally rely to some degree on
approvals or on some data submitted by previous applicants for
comparable innovator drug products, cannot be marketed during
the period of exclusivity. The market exclusivity provisions of
the DPC-PTR Act bar only the marketing of competitive products
that are the subject of abbreviated applications, not products
that are the subject of full NDAs. The DPC-PTR Act also may
provide a maximum time of five years to be restored to the life
of any one patent for the period it takes to obtain FDA approval
of a drug product, including biological drugs. No assurances
exist that the exclusivity or patent restoration benefits of the
DPC-PTR Act will apply to any of our product candidates.

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

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The European Union also generally provides options for its
Member States to control the prices of medicinal products for
human use. A Member State may approve a specific price for the
medicinal product or it may instead adopt a system of direct or
indirect controls on the profitability of the company placing
the medicinal product on the market. For example, the regulation
of prices of pharmaceuticals in the United Kingdom (U.K.) is
generally designed to provide controls on the overall profits
pharmaceutical companies may derive from their sales to the U.K.
National Health Service. The U.K. system is generally based on
profitability targets or limits for individual companies which
are normally assessed as a return on capital employed by the
company in servicing the National Health Service market,
comparing capital employed and profits.

In comparison, Italy generally establishes prices for
pharmaceuticals based on a price monitoring system. The
reference price is the European average price calculated on the
basis of the prices in four reference markets: France, Spain,
Germany and the United Kingdom. Italy typically levels the price
of medicines belonging to the same therapeutic class on the
lowest price for a medicine belonging to that category (i.e.,
same active principle, same pharmaceutical form, same route of
administration). Spain generally establishes the selling price
for new pharmaceuticals based on the prime cost, plus a profit
margin within a range established each year by the Spanish
Commission for Economic Affairs. Promotional and advertising
costs are limited.

In Canada, prices for most new drugs are generally limited such
that the cost of therapy for the new drug is in the range of the
cost of therapy for existing drugs used to treat the same
disease in Canada. Prices of breakthrough drugs and those which
bring a substantial improvement are generally limited to the
median of the prices charged for those drugs in other
industrialized countries, such as France, Germany, Italy,
Sweden, Switzerland, the United Kingdom and the United States.

There can be no assurance that any country which has price
controls or reimbursement limitations for pharmaceuticals will
allow favorable reimbursement and pricing arrangements with
respect to our applications for GLIADEL outside of the United
States.

We are also governed by other federal, state and local laws of
general applicability. 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 Protection Agency (USEPA). The DEA
regulates controlled substances, such as narcotics. A precursor
compound to DOPASCAN® Injection is a tropane-derivative
similar to cocaine and thus is subject to DEA regulations.
Establishments handling controlled substances must, for example,
be licensed and inspected by the DEA, and may be subject to
export, import, security and production quota requirements.
Radiolabeled products, including drugs, are also subject to
regulation by the Department of Transportation and to state and
federal licensing requirements. Various states often have
comparable health and environmental laws, such as those
governing the use and disposal of controlled and radiolabeled
products.

While we are not actively involved in product areas involving
biotechnology and we have no current plans to develop products
utilizing modern biotechnology, if we were to move in that
direction, we would potentially be subject to extensive
regulation. The USEPA, the FDA and other federal and state
regulatory bodies have developed or are in the process of
developing specific

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Intellectual Property Rights

We believe that intellectual property protection is crucial to
our business. Our success will depend in large part on our
ability to obtain and enforce intellectual property protection
for our products and processes and operate without infringing on
others intellectual property rights. As of
December 31, 2000, we owned or had licensed rights to more
than 100 U.S. patents and patent applications protecting
our key technologies and to corresponding foreign patents and
patent applications. We also own certain trademarks.

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 the opposition,
and the subject patent was revoked. However, the patentee has
appealed the initial determination, and the patent could be
reinstated. If the patent is reinstated, litigation could result.

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Technology Licensing Agreements

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 by two of the
U.S. patents under this license which expire in 2005 and
certain related international patents and patent applications.
In April 1994, Scios assigned all of its rights and obligations
under the GLIADEL® Wafer Agreement to MIT.

Under the GLIADEL® Wafer Agreement, we are obligated to pay
a royalty on all net sales of products incorporating such
technology as well as a percentage of all royalties received by
us from sublicensees and certain advance and minimum annual
royalty payments. We have exclusive worldwide rights to the
technology for brain cancer therapeutics, subject to certain
conditions, including a requirement to perform appropriate
preclinical tests and file an IND with the FDA within
24 months of the identification of a drug-polymer product
having greater efficacy than GLIADEL® Wafer. In addition,
we are obligated to meet certain development milestones.
Although we believe that we can comply with such obligations,
our failure to perform these obligations could result in losing
our rights to new polymer-based products.

In June 1996, we entered into a license agreement with MIT and
Johns Hopkins respecting a patent application covering certain
biodegradable polymers for use in connection with the controlled
local delivery of certain chemotherapeutic agents (including
paclitaxel (TAXOL®) and camptothecin) for treating solid
tumors. 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. Although we believe that
we can comply with such obligations, our failure to perform
these obligations could result in losing our rights to such
technology.

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
additional PPEs patent applications. 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
amounts for, and meet deadlines regarding, development of this
technology. In the event of termination of these licenses, we
could lose our rights to the use of the licensed technology.

We and Johns Hopkins are parties to exclusive license agreements
covering the neurotrophic use of neuroimmunophilin ligands,
which were jointly discovered by scientists at, and are jointly
owned by, Johns Hopkins and us, and inhibition of PARP for
neuroprotective uses and certain other technologies. These
agreements require us to pay, among other things, 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 amounts for, and meet deadlines regarding,
development of the technologies. In the event of termination of
these licenses, we could lose our rights to use the licensed
technology (or in the case of joint inventions, exclusive use of
such technology). In the case of our license with Johns Hopkins
relating to neuroimmunophilin ligands, Johns Hopkins is entitled
to a portion of all milestone payments paid to us, including
payments under our collaboration with Amgen, and a royalty on
net sales of neuroimmunophilin ligand products, again including
sale of products under our collaboration with Amgen.

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

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Under the RTI Agreement, we reimbursed RTI for certain past
patent-related expenses and agreed to make annual payments to
RTI to support mutually agreed-upon research that was conducted
at RTI through March 1999. In addition, we are obligated to
pay RTI a royalty on gross revenues we receive from products
derived from the licensed technology and from sublicensee
proceeds and to make certain minimum royalty payments following
the first commercial sale of such products. We must use
commercially reasonable efforts to develop products related to
the licensed technology and to meet certain performance
milestones. Our failure to perform our obligations under the RTI
Agreement in the future could result in termination of the
license.

United States Government Rights

Aspects of the technology licensed by us under agreements with
third party licensors may be subject to certain government
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 grant licenses which may
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. Our
principal technology license agreements contain provisions
recognizing these government rights.

Marketing, Sales and Distribution

Prior to 2000, our strategy had been to establish collaborations
with larger pharmaceutical companies where possible to develop
and promote products that require extensive development, sales
and marketing resources.

However, during 2000, we began the transformation into a
fully-integrated biopharmaceutical company through our
reacquisition of Aventis rights to GLIADEL® Wafer. In
November 2000, David P. Wright joined us as our Executive Vice
President, Commercial Operations. Mr. Wright has extensive
experience in the marketing, sale and distribution of
pharmaceutical products. He is assembling an in-house department
containing marketing, sales management, medical affairs,
reimbursement and other relevant functions to manage a sales
force of at least 20 people provided through Cardinal Health.
Our contract with Cardinal Health allows us to bring this sales
force in-house after 12 months on prescribed terms. In
addition, our GLIADEL® Wafer product is distributed through
Cord Logistics, Inc., which handles fulfillment of customer
orders.

In Europe, we have a temporary arrangement with IDIS Limited,
based in the U.K., for the distribution of GLIADEL® Wafer
on a named hospital basis, while we consider whether to build an
in-house European marketing and sales organization or to
out-source the marketing and sale of GLIADEL® Wafer in
Europe. While the marketing, sale and distribution of
GLIADEL® Wafer in

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The establishment of our Commercial Operations function will
give us more options in the commercialization of our product
candidates (other than our FKBP neuroimmunophilin ligands, which
are licensed to Amgen and discussed below). For example, if
approved, we may be able to market and sell AQUAVAN®
Injection, GPI-5693, PACLIMER® Microspheres, and LIDOMERTM
Microspheres ourselves in the U.S., and possibly in Europe (if
we build our own European commercial operations unit), while
seeking development and/or commercialization partners elsewhere
in the world.

From time to time, we are in discussions with potential partners
for the development and commercialization of GLIADEL® Wafer
in Japan, NAALADase inhibitors in Japan and Europe, and
DOPASCAN® Injection in Europe and other technologies for
different territories.

Amgen Collaboration

In August 1997, we entered into a collaboration with Amgen to
research, develop and commercialize a broad class of
neuroimmunophilin ligands, referred to as FKBP neuroimmunophilin
ligands, as well as any other compounds that may result from the
collaboration, for all human therapeutic and diagnostic
applications. Amgen initially paid us a one time, non-refundable
signing fee of $15 million in 1997 and also invested an
additional $20 million in us in exchange for 640,095 shares
of our common stock and five-year warrants to purchase up to an
additional 700,000 shares of our common stock at an exercise
price of $35.15 per share. In connection with the sale of these
securities, we granted Amgen certain demand and
piggyback registration rights under applicable
securities laws.

As part of this collaboration, Amgen agreed to fund up to a
total of $13.5 million to support our research relating to
the FKBP neuroimmunophilin ligand technology. This research
funding began on October 1, 1997, and concluded in
September 2000.

If Amgen achieves certain specified development objectives in
each of ten different clinical indications, seven of which are
neurological (i.e., Parkinsons disease, Alzheimers
disease, traumatic brain injury, traumatic spinal cord injury,
multiple sclerosis, neuropathy and stroke) and three of which
are non-neurological, Amgen has agreed to pay us up to a total
of $392 million in milestone payments.

We will receive royalties on any future sales of products
resulting from our collaboration with Amgen. Amgen has agreed to
fund, develop and commercialize the FKBP neuroimmunophilin
ligand technology. Under limited circumstances, we have the
option to conduct certain Phase I and Phase II clinical trials
on one product candidate in one indication and we have the right
to co-promote in the United States one product resulting from
the collaboration.

Other Agreements

In October 1995, we entered into an agreement appointing Orion
Pharma distributor for GLIADEL® Wafer in Scandinavia, and
in December 1995 we entered into an agreement with DRL for the
marketing, sale and distribution of DOPASCAN® Injection in
Japan, Korea and Taiwan.

Competition

We are involved in evolving 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

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We are aware of several competing approaches under development
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.

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. However, much of this activity has focused on
naturally occurring growth factors. Such large molecules
generally cannot cross the blood-brain barrier and thus present
problems in administration and delivery. One company has
announced that certain of its neuroimmunophilin ligands showed
positive results in stimulating nerve growth in an animal model
of nerve crush, and has disclosed that it has made patent
filings covering compounds and uses in connection with nerve
growth promotion. This company also announced in 1999 that it
began a Phase II clinical trial for peripheral neuropathy using
a neuroimmunophilin compound it originally was developing for
multiple drug resistance in cancer patients. In addition,
another company announced that IGF-1 showed positive results in
clinical trials of a peripheral neurodegenerative disorder.

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.
Glutamate or NMDA receptor antagonists are under development by
several other companies.

The anesthesia/ sedation field is concentrated in the United
States mainly among four major companies, 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. 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 do develop it into a safe and
effective drug and it is cleared for marketing, the commercial
prospects for AQUAVAN Injection will depend heavily on its
safety and efficacy profile relative to alternatives then
available in the market.

We believe that 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 approval processes,
and supply commercial quantities of the products to the market
is expected to be an important determinant of market success.
Other competitive factors include the capabilities of our
collaborators, product efficacy and safety, timing and scope of
regulatory approval, product availability, marketing and sales
capabilities, reimbursement

19



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Product Liability and Insurance

Product liability risk is inherent in the testing, manufacture,
marketing and sale of our product candidates, and there can be
no assurance that we will be able to avoid significant product
liability exposure. While we currently maintain $15 million
of product liability insurance 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, 2000, we employed 254 individuals. Of
these 254 employees, 211 were employed in the areas of
research and product development and in manufacturing and
quality control of GLIADEL. The remaining 43 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.

All employees are required to enter into a confidentiality
agreement with us. Hiring and retaining qualified personnel are
important factors for our future success. We are likely to
continue to add personnel particularly in the areas of sales and
marketing, research, clinical research and operations, including
manufacturing. Intense competition exists for these qualified
personnel from other biotechnology and biopharmaceutical
companies as well as academic, research and governmental
organizations. 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.




Item 1A.  Executive Officers and Other
Significant Employees of Registrant

Craig R. Smith, M.D., age 55, joined the Company
as a Director at the Companys inception in July 1993.
Dr. Smith was elected President and Chief Executive Officer
in August 1993 and was elected Chairman of the Board in January
1994. Prior to joining the Company, Dr. Smith was Senior
Vice President for Business and Market Development at Centocor,
Inc., a biotechnology corporation. Before joining Centocor,
Dr. Smith served on the Faculty of the Department of
Medicine at Johns Hopkins Medical School. Dr. Smith
received his M.D. from the State University of New York at
Buffalo in 1972 and received training in Internal Medicine at
Johns Hopkins Hospital from 1972 to 1975. Dr. Smith is a
member of the board of directors of CellGate, Inc. and Molecular
Neuroimaging Inc.

David P. Wright, age 53, joined the Company as
Executive Vice President, Commercial Operations in November
2000. From 1990 through 1999, Mr. Wright was employed by
MedImmune, Inc., most recently as Executive Vice President Sales
and Marketing. Prior to joining MedImmune, Mr. Wright was
Vice President, Gastrointestinal Business Group, for Smith,
Kline and French Laboratories, and held various marketing and
sales posts with G.D. Searle, Glaxo, Hoffmann-LaRoche and
Pfizer. Mr. Wright received a Master of Arts in Speech
Pathology and Audiology from the University of South Florida in
1969.

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John P. Brennan, age 58, joined the Company as
Vice President, Operations in January 1994 and became Senior
Vice President, Operations in January 1997. In February 1999,
Mr. Brennan was promoted to Senior Vice President,
Technical Operations and General Manager, Drug Delivery
Business. From 1980 to 1993, he was Vice President, Technical
Operations and Manufacturing for G.D. Searle and Co., where he
was responsible for the operation of manufacturing plants in
North America, Latin America and Europe and the worldwide
pharmaceutical and process technology. Mr. Brennan received
his B.S. in Chemistry from the Philadelphia College of Pharmacy
and Science in 1968 and attended the Wharton Graduate Management
Program in 1976.

Andrew R. Jordan, age 53, joined the Company as
Vice President, Secretary, Treasurer and Chief Financial Officer
in September 1993 and became Senior Vice President, Treasurer
and Chief Financial Officer in January 1997. Prior to joining
the Company, Mr. Jordan held various positions with KPMG
LLP, a public accounting firm, including partner since 1983.
Mr. Jordans experience at KPMG LLP included advising
early-stage and emerging technology companies and initial and
secondary public equity and debt offerings. He received his B.A.
from Rutgers College in 1969 and his MBA from Rutgers Graduate
School of Business in 1973 and is a Certified Public Accountant.

Peter D. Suzdak, Ph.D., age 42, joined the Company
in March 1995 as Vice President, Research. In February 1999,
Dr. Suzdak was promoted to Senior Vice President,
Research & Development. Prior to joining the Company,
Dr. Suzdak was Director of Neurobiology at Novo Nordisk A/S
and was responsible for all neurobiology research from 1993 to
1995, and Department Head for Receptor Neurochemistry from 1988
to 1992 as well as a member of the drug discovery management
group from 1989 to 1995. Dr. Suzdak received his Ph.D. in
Neuroscience from the University of Connecticut and a B.S. in
Pharmacy from St. Johns University.

Thomas C. Seoh, age 43, joined the Company in
April 1995, as Vice President, General Counsel and Secretary. In
August 1999, he was promoted to Senior Vice President. In
February 2001, he became Senior Vice President, Corporate
Development, General Counsel and Secretary. Mr. Seoh
previously held legal management positions with ICN
Pharmaceuticals, Inc. group, including Vice President and
Associate General Counsel, and with Consolidated Press U.S.,
Inc., and was associated with the New York and London offices of
Lord Day & Lord, Barrett Smith. Mr. Seoh received
his J.D. and A.B. from Harvard University.

Nancy J. Linck, Ph.D., J.D., age 59, joined the
Company as Vice President, Intellectual Property in November
1998. In February 2001, Dr. Linck was promoted to Senior
Vice President, Intellectual Property and Deputy General
Counsel. From 1994 to 1998, Dr. Linck was Solicitor for the
U.S. Patent and Trademark Office, where she acted as
general counsel for the Commissioner of Patents and Trademarks.
From 1987 to 1994, Dr. Linck worked as a patent and
trademark litigator at the intellectual property law firm of
Cushman, Darby & Cushman, first as an Associate from
1987 to 1990, and later as a Partner from 1991 to 1994. Since
1995, Dr. Linck has been engaged as an Adjunct Professor of
Law, first at George Washington University School of Law and
presently at Georgetown University Law Center. Dr. Linck
received her B.S. in Chemistry from the University of
California, Berkeley, her M.S. and Ph.D. in Inorganic Chemistry
from the University of California, San Diego, and her J.D. from
Western New England College School of Law.

William C. Vincek, Ph.D., age 53, joined the
Company as Vice President, Corporate Quality in August 1997. In
August 1999, he became Vice President, Pharmaceutical &
Chemical Development. From November 1993 until Dr. Vincek
joined the Company, he was Group Director, CMC &
Preclinical Regulatory Affairs and Global Research and
Development GMP Quality Assurance at Glaxo Wellcome, Inc. Prior
to that time, Dr. Vincek held various positions at
SmithKline Beecham Pharmaceuticals and related entities.
Dr. Vincek received his Ph.D. in Medicinal Chemistry from
the University of Kansas, where he also received an M.S. in
Medicinal Chemistry. Dr. Vincek received a B.S. in
Chemistry from Colorado State University.

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Denise Battles, age 46, joined the Company as
Director of Quality Assurance in August 1994 and became Senior
Director of Product Compliance in August 1997. Ms. Battles
was promoted to Vice President of Corporate Quality in August
1999. Prior to joining the Company, Ms. Battles was
employed by Pharmaceutical Systems, Incorporated as the Director
of Quality Assurance from 1993 to 1994. Prior thereto,
Ms. Battles held various positions with Quality Control and
Quality Assurance at Baxter Healthcare Corporation.
Ms. Battles received her B.S. in Biology from Fisk
University in 1977 and received training at the Lake Forest
Graduate School of Management.

Dana C. Hilt, M.D., age 47, joined the Company as
Vice President, Clinical Research in May 1998. In February 1999,
Dr. Hilt became Vice President, Clinical Research and Drug
Metabolism. Prior to joining the Company, Dr. Hilt was
employed by Amgen, most recently as Director, Neuroscience from
1996 to 1998. Prior to joining Amgen, Dr. Hilt held a
variety of positions at the University of Maryland School of
Medicine and the National Institutes of Health. Dr. Hilt
received his B.S. degree in Chemistry from the University of
Maine, his M.D. from Tufts University School of Medicine, and
received training in Internal Medicine at Harvard Medical School
and Neurology at Johns Hopkins Hospital.

Margaret M. Contessa age 52, joined Guilford as
Vice President of Human Resources in November 2000. Prior to
joining Guilford, from March 1998 to January 1999,
Ms. Contessa was Vice President, Human Resources of Witco
Corporation, a 6,000-person, multibillion-dollar manufacturer of
specialty chemicals located in Greenwich, Connecticut. From 1986
through 1998, she was employed by Engelhard Corporation as
Director, Human Resources, and prior to that held various human
resources positions with Schering Plough and BASF.
Ms. Contessa received her B.S. in Management Science at
Fairleigh Dickinson University in 1977 and received training at
Harvard and Columbia University.




Item 2.  Properties.

In August 1994, we entered into a master lease for an
approximately 83,000 square foot building in Baltimore,
Maryland that currently serves as our headquarters. We currently
occupy 23,000 square feet for office space, 18,000 square
feet for manufacturing space for GLIADEL® Wafer and
potentially other polymer-based products, and 42,000 square
feet of research and development laboratories. The master lease
expires in July 2005. Two five-year renewal options are
available to us or we may exercise a purchase option any time
after the ninth year of the lease for the then-current fair
market value.

In February 1998, we entered into an operating lease with a
trust affiliated with First Union National Bank respecting the
construction and occupancy of a new laboratory and office
facility, consisting of approximately 73,000 square feet. We
began moving personnel into this facility in June 1999 and
consolidated all of our operations into our current headquarters
and the new facility during the third quarter of 1999. The lease
expires in February 2005, at which time we have an option
(i) to purchase the property or (ii) to sell the
property on behalf of the trust (subject to certain limitations
and related obligations). In addition, we may, with the consent
of First Union, enter into a new lease arrangement. See
Managements Discussion of Financial Condition and
Results of Operations  Liquidity and Capital
Resources for a more complete description of the
Companys arrangements with First Union.




Item 3.  Legal Proceedings

We are not a party to any material legal proceedings.




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

None.

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Item 4A.  Risk Factors

An investment in our stock is very speculative and involves a
high degree of risk. You should consider the following important
factors, as well as the other information in this report and our
SEC filings, carefully before purchasing our stock.

We have a history of losses and our future profitability is
uncertain.

We may not be able to achieve or sustain significant revenues or
earn a profit in the future. We founded Guilford in July 1993,
and since that time, with the sole exception of 1996, we have
not earned a profit in any year. Our losses result mainly from
the significant amount of money that we have spent on research
and development. As of December 31, 2000, we had an
accumulated deficit of approximately $130 million. We
expect to have significant additional losses over the next
several years.

Most of our product candidates are in research or early stages
of pre-clinical and clinical development. Except for
GLIADEL® Wafer, none of our products or product candidates
has been sold to the public. Up to this point in this time,
nearly all of our revenues have come from:



| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | payments from Aventis from the sale and distribution of
	GLIADEL® Wafer,                                                                                                  
|
| |  | one-time, non-refundable signing fees from our corporate
	partners under agreements supporting the research, development
	and commercialization of our product candidates,
|
| |  | one-time payments from our corporate partners when we achieve
	regulatory or development milestones, and                                                                  
|
| |  | research funding under our agreement with Amgen.                                                                                                                          

We recently reacquired from Aventis the right to market, sell
and distribute GLIADEL® Wafer so we will not receive any
future payments from Aventis for GLIADEL® Wafer. We do not
expect revenues from GLIADEL® Wafer to be sufficient to
support all our anticipated future activities. Whether we will
ever be able to generate significant revenues from GLIADEL®
Wafer continues to be uncertain, especially in light of our
inexperience in the marketing, sales and distribution area. In
addition, we do not expect to generate revenues from the sale of
our product candidates for the next several years, if ever.

We may never recognize significant additional revenues from
Amgen because of significant risks. These risks are part of each
of the following activities:



| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | new product development,                                                                                                                                                                                                                               
|
| |  | the conduct of pre-clinical animal studies and human clinical
	trials,                                                                                                                                                                                 
|
| |  | applying for and obtaining regulatory approval to market and
	sell product candidates,                                                                                                                                                                 
|
| |  | expanding the processes for making product candidates from the
	relatively small quantities and qualities needed for research
	and development purposes to the commercial scale manufacture
	needed to support marketing and sales of new products, and
|
| |  | commercialization of new products.                                                                                                                                                                                                                     

We discuss these and other risks in greater detail below in this
Risk Factors section.

Many factors will dictate our ability to achieve sustained
profitability in the future, including:



| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | our ability to successfully market, sell and distribute
	GLIADEL® Wafer,

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| |   |                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | receipt of regulatory clearance to market and sell GLIADEL®
	Wafer for patients undergoing initial surgery for malignant
	glioma in the United States as well as in Europe and other
	countries,



| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | receipt of regulatory clearance to market and sell GLIADEL®
	Wafer for the recurrent indication in Europe and other countries,                                                                       
|
| |  | the successful development and commercialization of product
	candidates on our own, or that result from our collaboration
	with Amgen, and                                                           
|
| |  | our ability to enter into additional collaborative arrangements
	and license agreements with other corporate partners for our
	product candidates and earlier stage technologies as we develop
	them.

We will need to conduct substantial additional research,
development and clinical trials. We will also need to receive
necessary regulatory clearances both in the United States and
foreign countries. We expect that these research, development
and clinical trial activities, and regulatory clearances,
together with future general and administrative activities, will
result in significant expenses for the foreseeable future.

We depend on a single product, GLIADEL® Wafer,
for revenues.

Our short-term prospects depend to a large extent on sales of
GLIADEL® Wafer, our only commercial product. We
commercially launched GLIADEL® Wafer in the United States
in February 1997. We currently do not know whether the product
will ever gain broad market acceptance or the extent of the
marketing efforts necessary to achieve broad market acceptance.
If GLIADEL® Wafer fails to gain market acceptance, the
revenues we receive from sales of GLIADEL® Wafer would be
unlikely to increase.

On October 23, 2000, we reacquired from Aventis the right
to market, sell and distribute GLIADEL® Wafer. Until then,
Aventis held exclusive worldwide (excluding Scandinavia and
Japan) marketing, sales and distribution rights for
GLIADEL® Wafer. Under that arrangement, Aventis paid us
royalties and also made designated milestone payments upon
achieving specified domestic and international regulatory
approvals. For example, Aventis made a $1.0 million payment
to us in each of March and September 2000. After the
reacquisition, Aventis is no longer obligated to make any
payments to us.

We have approval from the FDA to market GLIADEL® Wafer in
the United States for only a limited subset of patients who
suffer from brain cancer. Our approval is for those patients for
whom surgical tumor removal, commonly referred to as
resection, is called for and who have
recurrent forms of a type of brain cancer called
glioblastoma multiforme. A recurrent form of glioblastoma
multiforme is one in which the cancer has returned after initial
surgery to remove a brain tumor. The number of patients
undergoing recurrent surgery for glioblastoma multiforme is very
limited, and we believe the total number of patients on an
annual basis who have glioblastoma multiforme in the United
States is approximately 10,000.

In order to expand the medical uses, commonly referred to as
indications, for which we may market GLIADEL®
Wafer, we must successfully complete additional lengthy clinical
trials. In November 2000, we reported results of a multicenter,
randomized, double-blind, placebo-controlled, 240-person trial
investigating GLIADEL® Wafer for patients undergoing
initial surgery for brain cancer. We are currently preparing a
supplemental New Drug Application for filing with the FDA for
first surgery, and expect to file similar applications in other
countries. We may not receive the desired regulatory clearances
for the first line indication on the basis of these clinical
data. If GLIADEL® Wafer fails to receive regulatory
clearance, that failure would limit our ability to market
GLIADEL® Wafer for use in patients beyond the current
narrow indication and reduces the likelihood of increasing the
revenues that we receive from sales of GLIADEL® Wafer.

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In addition, applications for marketing approval for the current
indication for GLIADEL® Wafer have been made in a number of
foreign countries, and as of the date of this annual report,
GLIADEL® Wafer is approved for the market in only
21 countries, including France, Spain, Germany and the U.K.
We have been working to transfer these international regulatory
approvals to us. If we are not able to successfully transfer
existing approvals or obtain additional approvals, the
geographic market for GLIADEL® Wafer would remain limited,
which reduces the likelihood of increasing the revenues that we
receive from sales of GLIADEL® Wafer. Regardless of the
number of foreign regulatory approvals that we have received,
international sales to date comprise a small percentage of total
sales of GLIADEL® Wafer.

GLIADEL® Wafer is also a very fragile product and can
easily break into many pieces if it is not handled with great
care. Product recalls due to excessive breakage of the
GLIADEL® Wafers or for other reasons could also have a
negative effect on our business, financial condition and results
of operations.

We have never marketed or sold our products directly before
and we may not be successful in our efforts to market, sell and
distribute GLIADEL® Wafer. Additionally, we expect to incur
significant expense in marketing, selling and distributing
GLIADEL® Wafer.

From GLIADEL® Wafers commercial launch until
December 31, 2000, Aventis marketed, sold and distributed
GLIADEL® Wafer. Our recent reacquisition of the right to
market, sell and distribute GLIADEL® Wafer marks an
important change in our business. Only recently did we acquire
direct sales capability. We have never engaged in significant
marketing and sales efforts. Our limited experience in
developing, maintaining and expanding a direct specialty
marketing and sales force may restrict our success in selling
GLIADEL® Wafer. The launch of our marketing and sales
efforts may distract managements attention from our core
business.

Alternatively, we may contract with third parties for the
marketing, sale and distribution of GLIADEL® Wafer. We
entered into an agreement with Cardinal Health to hire and train
sales representatives to sell GLIADEL® Wafer.

Our operating results are likely to fluctuate from quarter to
quarter, which could cause the price of our common stock to
decline.

Our revenues and expenses have fluctuated significantly in the
past. This fluctuation has in turn caused our operating results
to vary significantly from quarter to quarter and year to year.
We expect the fluctuations in our revenues and expenses to
continue and thus our operating results should also continue to
vary significantly. These fluctuations are due to a variety of
factors, including:



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the timing and amount of sales of GLIADEL® Wafer,                                                                                                                                             
|
| |  | the timing and realization of milestone and other payments from
	our corporate partners,                                                                                                      
|
| |  | the timing and amount of expenses relating to our research and
	development, product development, and manufacturing activities,
	and                                                          
|
| |  | the extent and timing of costs related to our activities to
	obtain patents on our inventions and to extend, enforce and/ or
	defend our patent and other rights to our intellectual property.

Because of these fluctuations, it is possible that our operating
results for a particular quarter or quarters will not meet the
expectations of public market analysts and investors, causing
the market price of our common stock to decline. We believe that
period-to-period comparisons of our operating results are not a
good indication of our future performance and you should not
rely on those comparisons to predict our future operating or
share price performance.

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The market price of our stock may be negatively affected by
market volatility.

The market price of our stock has been and is likely to continue
to be highly volatile. Furthermore, the stock market generally
and the market for stocks of companies with lower market
capitalizations and small biopharmaceutical companies, like us,
have from time to time experienced and likely will again
experience significant price and volume fluctuations that are
unrelated to the operating performance of a particular company.

From time to time, stock market professionals publish research
reports covering our business and our future prospects. For a
number of factors, we may be unable to meet the expectations of
securities analysts or investors and our stock price may
decline. These factors include:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | announcements by us or our competitors of clinical results,
	technological innovations, product sales, new products or
	product candidates,
|
| |  | developments or disputes concerning patent or proprietary rights,                                                                          
|
| |  | regulatory developments affecting our products,                                                                                            
|
| |  | period-to-period fluctuations in the results of our operations,                                                                            
|
| |  | market conditions for emerging growth companies and
	biopharmaceutical companies,                                                          
|
| |  | revenues received from GLIADEL® Wafer, and                                                                                                 
|
| |  | our expenditures.                                                                                                                          

In the past, following periods of volatility in the market price
of the securities of companies in our industry, securities class
action litigation has often been instituted against those
companies. If we face such litigation in the future, it would
result in substantial costs and a diversion of managements
attention and resources, which would negatively impact our
business.

Our collaboration with Amgen may be a significant source of
future revenue for us. The success of this collaboration depends
on a number of factors, most of which are outside of our
control.

The achievement of the milestones that trigger payments by Amgen
to us depend on a number of factors. We do not control many of
these factors, including:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | the selection of one or more appropriate lead compounds,                                                          
|
| |  | successful design and completion of pre-clinical and clinical
	development activities,                            
|
| |  | application for and obtaining regulatory clearances to market
	potential products,                                
|
| |  | commercialization of products, and                                                                                
|
| |  | the successful preservation and extension of the patent and
	other intellectual property rights licensed to Amgen.

Moreover, under the terms of our collaboration with Amgen, we
have no control over the development activities regarding the
FKBP neuroimmunophilin ligand technology, which are within the
sole discretion of Amgen. Our agreement with Amgen also does not
specify a binding timetable for achieving development and
commercialization goals with respect to the FKBP
neuroimmunophilin ligand technology. Even if Amgen determines to
conduct clinical trials on a product candidate resulting from
our collaboration, Amgen still may not be able to complete those
clinical trials successfully and then receive approval from the
FDA or foreign regulatory authorities to market and sell any
such products.

26



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The FKBP neuroimmunophilin ligand technology we have licensed to
Amgen represents a new approach to the treatment of certain
types of neurological and other diseases and conditions. We and
Amgen have very limited experience in taking the kinds of
compounds likely to result from our work and formulating them
into final drug products appropriate for sale to the public. In
addition, both of us have limited experience with the transition
of these compounds from the quantity and quality needed to
support research and development efforts to the quantities
needed to support commercial scale distribution. Also, both we
and Amgen have limited experience with the manufacture of
compounds of this type for commercial sale. Amgen may not be
successful in scaling-up and manufacturing adequate quantities
needed for commercial sale. For a more complete description of
the kinds of risks associated with product manufacture, you
should read the section entitled Our manufacturing
capabilities are limited... below.

Even if Amgen is able to obtain all regulatory approvals
necessary to market a product resulting from our collaboration,
our agreement does not specify any minimum sales requirements
for Amgen. Thus, any royalty amounts that Amgen pays us in the
future will depend entirely on the sales and marketing efforts
of Amgen, an activity over which we will have no control. In
addition, our agreement with Amgen does not prevent Amgen from
pursuing technologies for product candidates that compete with
the FKBP neuroimmunophilin ligand technology in the future.

Our manufacturing capabilities are limited by the size of our
facilities, our inexperience manufacturing large quantities of
product and the potential inability to locate a third party
manufacturer for our product candidates.

To commercialize GLIADEL® Wafer, we must be able to
manufacture it in sufficient quantities, in compliance with
regulatory requirements, and at acceptable costs. We manufacture
GLIADEL® Wafer at one of our two manufacturing facilities
in Baltimore, Maryland, which consists of production
laboratories and redundant cleanrooms. We estimate that the
facility currently has the capacity to manufacture approximately
8,000 GLIADEL® Wafer treatments per year.

We have manufactured only limited quantities of GLIADEL®
Wafer in our facilities. We cannot be sure that we will be able
to continue to satisfy applicable regulatory standards,
including FDA requirements, and other requirements relating to
the manufacture of GLIADEL® Wafer in the facilities.

We also face risks inherent in the operation of a facility for
manufacture of GLIADEL® Wafer. These risks include:



| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | unforeseen plant shutdowns due to personnel, equipment or other
	factors, and                               
|
| |  | the possible inability of the facilities to produce
	GLIADEL® Wafer in quantities sufficient to meet demand.

Any delay in the manufacture of GLIADEL® Wafer could result
in delays in product shipment. Delays in product shipment would
have a negative effect on our business and operating results.

Currently, we have no manufacturing capabilities for any of our
product candidates. Consequently, in order to complete the
commercialization process of any of our product candidates, we
must either acquire, build or expand our internal manufacturing
capabilities or rely on third parties to manufacture these
product candidates. We cannot be sure that we or our corporate
partners, including Amgen, will be able to (1) acquire,
build or expand facilities that will meet quality, quantity and
timing requirements or (2) enter into manufacturing
contracts with others on acceptable terms. If we or our
corporate partners are unable to accomplish these tasks, it
would impede our efforts to bring our product candidates to
market, which would adversely affect our business. Moreover, if
we decide to manufacture one or more of our product candidates
ourselves, we would incur substantial start-up expenses and need
to expand our facilities and hire additional personnel.

27



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Third-party manufacturers must also comply with FDA, Drug
Enforcement Administration, and other regulatory requirements
for their facilities. In addition, manufacture of product
candidates on a limited basis for investigational use in animal
studies or human clinical trials does not guarantee that
large-scale, commercial production is viable. Small changes in
methods of manufacture can affect the safety, efficacy,
controlled release or other characteristics of a product.
Changes in methods of manufacture, including commercial
scale-up, can, among other things, require the performance of
new clinical studies.

Revenues from our products, specifically GLIADEL®

Wafer, depend in part on reimbursement from health care
payors, which is uncertain.

The continuing efforts of government and insurance companies,
health maintenance organizations and other payors of health care
costs to contain or reduce costs of health care may affect our
future revenues and profitability. These efforts may also affect
the future revenues and profitability of our potential
customers, suppliers and collaborative partners, in turn
affecting demand for our products. For example, in certain
foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. In the United
States, given recent federal and state government initiatives
directed at lowering the total cost of health care, the
U.S. Congress and state legislatures will likely continue
to focus on health care reform, the cost of prescription
pharmaceuticals and on the reform of the Medicare and Medicaid
systems. While we cannot predict whether any such legislative or
regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a negative effect on our
business and operating results.

Our ability to commercialize our products successfully will
depend in part on the extent to which private health insurers,
organizations such as HMOs and governmental authorities can
obtain appropriate reimbursement levels for the cost of our
products and related treatment. Third-party payors are
increasingly challenging the prices charged for medical products
and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations such as
HMOs, which could control or significantly influence the
purchase of health care services and products, as well as
legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for or
rejection of our products. The cost containment measures that
health care payors and providers are instituting and the effect
of any health care reform could materially and adversely affect
our ability to operate profitably.

Furthermore, even if reimbursement is available, we cannot be
sure that it will be available at price levels sufficient to
realize an appropriate return on our investment in GLIADEL®
Wafer or our other product candidates.

We face technological uncertainties in connection with the
research, development and commercialization of new products.

The research, development and commercialization of
pharmaceutical drugs inherently involve significant risk. Before
we or our corporate partners can be in a position to market,
sell and distribute a new product, each of us will have to:



| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expend substantial capital and effort to develop our product
        candidates further, which includes conducting extensive and
        expensive pre-clinical animal studies and human clinical trials,
|
| |  | apply for and obtain regulatory approval to market and sell such
        product candidates, and                                                                                                         
|
| |  | conduct other costly activities related to preparation for
        product launch, among many other activities.                                                                                          

In some of our research programs, we are using compounds that we
consider to be prototype compounds in the research
phase of our work. By prototype compounds we mean compounds that
we

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In addition, our product candidates are subject to the risks of
failure inherent in the development of products based on new and
unproved technologies. These risks include the possibility that:



| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our new approaches will not result in any products that gain
	market acceptance,                                                                                                         
|
| |  | a product candidate will prove to be unsafe or ineffective, or
	will otherwise fail to receive and maintain regulatory
	clearances necessary for marketing,                              
|
| |  | a product, even if found to be safe and effective, could still
	be difficult to manufacture on the large scale necessary for
	commercialization or otherwise not be economical to market,
|
| |  | a product will unfavorably interact with other types of commonly
	used medications, thus restricting the circumstances in which it
	may be used,                                         
|
| |  | proprietary rights of third parties will preclude us from
	manufacturing or marketing a new product, or                                                                                  
|
| |  | third parties will market superior or more cost-effective
	products.                                                                                                                     

As a result, our activities, either directly or through
corporate partners, may not result in any commercially viable
products.

We depend on collaborations with third parties for the
development and commercialization of our products.

Our resources are limited, particularly because we are
developing our technologies for a variety of different diseases.
Our business strategy requires that we enter into various
arrangements with:



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | corporate partners, such as Amgen,                                        
|
| |  | academic investigators at universities, such as Johns Hopkins
	and others,
|
| |  | licensors of technologies, such as Johns Hopkins, MIT and RTI,
	and       
|
| |  | licensees of our technologies, such as DRL and others.                    

Our success depends in large part upon the efforts of our
third party collaborators.

Our business strategy includes finding larger pharmaceutical
companies to collaborate with us to support the research,
development and commercialization of our product candidates. In
trying to attract corporate partners to collaborate with us in
the research, development and commercialization process, we face
serious competition from other small biopharmaceutical companies
and the in-house research and development staffs of the larger
pharmaceutical companies. If we are unable to enter into such
arrangements with corporate partners, our ability to proceed
with the research, development, manufacture or sale of product
candidates may be severely limited. For example, we are actively
seeking corporate partners to assist in the development of
DOPASCAN® Injection as well as our NAALADase and PARP
inhibitor neuroprotective drug programs, but we may not find
suitable corporate partners for these programs. It is common in
many corporate partnerships in our industry for the larger
partner to have responsibility for conducting pre-clinical
studies and human clinical

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Furthermore, larger pharmaceutical companies often explore
multiple technologies and products for the same medical
conditions. Therefore, they are likely to enter into
collaborations with our competitors for products addressing the
same medical conditions targeted by our technologies. Thus our
collaborators, including Amgen, may pursue alternative
technologies or product candidates in order to develop
treatments for the diseases or disorders targeted by our
collaborative arrangements. Our collaborators may pursue these
alternatives either on their own or in collaboration with
others, including our competitors. Depending on how other
product candidates advance, a corporate partner may slow down or
abandon its work on our product candidates or terminate its
collaborative arrangement with us in order to focus on these
other prospects.

We may be unable to obtain the additional capital needed to
operate and grow our business.

We will require substantial funds in order to cover the costs of
setting up a commercial operations function to take over the
commercialization of GLIADEL® Wafer from Aventis, continue
our research and development programs and pre-clinical and
clinical testing, and to manufacture and market our products. We
may be unable to obtain any future funds that we may require on
acceptable terms, or at all. Under our operating lease with a
trust affiliated with First Union National Bank for our new
research and development facility, we are required to hold, in
the aggregate, unrestricted cash, cash equivalents and
investments of $40 million at all times during the term of
the lease. In addition, we are required to maintain specified
amounts of cash, $18.3 million restricted at
December 31, 2000, as collateral at First Union under this
arrangement and other loan agreements with First Union. These
requirements may limit our ability to access our capital in the
future.

Our capital requirements depend on numerous factors, including:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | the progress of our research and development programs,                                                             
|
| |  | the progress of pre-clinical and clinical testing,                                                                 
|
| |  | the time and costs involved in obtaining regulatory approvals,                                                     
|
| |  | the cost of filing, prosecuting, defending and enforcing any
	patent claims and other intellectual property rights,
|
| |  | competing technological and market developments,                                                                   
|
| |  | changes in our existing research relationships with universities
	and others,                                      
|
| |  | our ability to establish collaborative arrangements with large
	pharmaceutical companies and others,               
|
| |  | the requirements and timing of entering into technology
	licensing agreements and other similar arrangements, and  
|
| |  | the progress of efforts to scale-up manufacturing processes.                                                       

We may use our existing resources before we may otherwise expect
because of changes in our research and development and
commercialization plans or other factors affecting our operating
expenses or capital expenditures, including potential
acquisitions of other businesses, assets or technologies.

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Our ability to raise future capital on acceptable terms depends
on conditions in the public and private equity markets and our
performance, as well as the overall performance of other
companies in the biopharmaceutical and biotechnology sectors.

We may be unable to protect our proprietary rights,
permitting competitors to duplicate our products and
services.

Any success that we have will depend in large part on our
ability to:



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | obtain, maintain and enforce intellectual property protection
	for our products and processes,
|
| |  | license rights to patents from third parties,                                                 
|
| |  | maintain trade secret protection, and                                                         
|
| |  | operate without infringing upon the proprietary rights of others.                             

Intellectual property for our technologies and products will be
a crucial factor in our ability to develop and commercialize our
products. Large pharmaceutical companies consider a strong
patent estate critical when they evaluate whether to enter into
a collaborative arrangement to support the research, development
and commercialization of a technology. Without the prospect of
reasonable intellectual property protection, it would be
difficult for a corporate partner to justify the time and money
that is necessary to complete the development of a product.

The rules and criteria for receiving and enforcing a patent for
pharmaceutical and biotechnological inventions are in flux and
are unclear in many respects. The range of protection given
these types of patents is uncertain, and a number of our product
candidates are subject to this uncertainty.

Many others, including companies, universities and other
research organizations, work in the areas of our business, and
we cannot be sure that the claims contained in our issued
patents will be interpreted as broadly as we would like in light
of the inventions of these other parties. In addition, we cannot
be sure that the claims set forth in our pending patent
applications will issue in the form submitted. These claims may
be narrowed or stricken, and the applications may not ever
ultimately result in valid and enforceable patents. Thus, we
cannot be sure that our patents and patent applications will
adequately protect our product candidates.

We are aware of at least one company, which has asserted
publicly that it has submitted patent applications claiming the
use of certain of its immunosuppressive compounds and multidrug
resistance compounds for nerve growth applications. That company
has also stated that it has issued U.S. patents and pending
U.S. applications that it states claim compounds that are
useful in nerve growth applications. We cannot give any
assurance as to the ability of our patents and patent
applications to adequately protect our neurotrophic product
candidates. Also, our neurotrophic product candidates may
infringe or be dominated by patents that have issued or may
issue in the future to third parties.

In order to protect our intellectual property position with
respect to our neuroimmunophilin ligands, we filed an opposition
in 1998 in an effort to prevent the final issuance of a European
patent to the company we discuss in the above paragraph. In
2000, we won the opposition and the subject patent was revoked.
However, the patentee has appealed the initial determination and
the patent could be reinstated. If the patent is reinstated,
litigation could result.

Furthermore, any or all of the patent applications assigned or
licensed to us from third parties may not be granted. We may not
develop additional products or processes that are patentable.
Any patents issued to us, or licensed by us, may not provide us
with any competitive advantages or adequate protection for our
products. Others may successfully challenge, circumvent or
invalidate any of our existing or future patents or intellectual
property.

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Our policy is to control the disclosure and use of our know-how
and trade secrets by entering into confidentiality agreements
with our employees, consultants and third parties. There is a
risk, however, that:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | these parties will not honor our confidentiality agreements,                                                                  
|
| |  | others will independently develop equivalent or competing
	technology,                                                        
|
| |  | disputes will arise concerning the ownership of intellectual
	property or the applicability of confidentiality obligations, or
|
| |  | disclosure of our trade secrets will occur regardless of these
	contractual protections.                                      

In our business, we often work with consultants and research
collaborators at universities and other research organizations.
To the extent that any of these consultants or research
collaborators uses intellectual property owned by others as part
of their work with us, disputes may arise between us and these
other parties as to which one of us has the rights to
intellectual property related to or resulting from the work done.

We support and collaborate in research conducted in
universities, such as Johns Hopkins, and in governmental
research organizations, such as the National Institutes of
Health. We may not be able to acquire exclusive rights to the
inventions or technical information that result from work
performed by university personnel or at these organizations.
Also, disputes may arise as to which party should have rights in
research programs that we conduct on our own or in collaboration
with others that are derived from or related to the work
performed at the university or governmental research
organization. In addition, in the event of a contractual breach
by us, some of our collaborative research contracts provide that
we must return the technology rights, including any patents or
patent applications, to the contracting university or
governmental research organization.

Questions of infringement of intellectual property rights,
including patent rights, may involve highly technical and
subjective analyses. Some or all of our existing or future
products or technologies may now or in the future infringe the
rights of other parties. These other parties might initiate
legal action against us to enforce their claims, and our defense
of the claims might not be successful.

We may incur substantial costs if we must defend against charges
of infringement of patent or proprietary rights of third
parties. We may also incur substantial costs if we find it
necessary to protect our own patent or proprietary rights by
bringing suit against third parties, including suits involving
our neurotrophic product candidates. We could also lose rights
to develop or market products or be required to pay monetary
damages or royalties to license proprietary rights from third
parties. In response to actual or threatened litigation, we may
seek licenses from third parties or attempt to redesign our
products or processes to avoid infringement. We may not be able
to obtain licenses on acceptable terms, or at all, or
successfully redesign our products or processes.

In addition to the risk that we could be a party to patent
infringement litigation, the U.S. Patent and Trademark
Office, or its foreign counterparts, could require us to
participate in patent interference proceedings that it declares.
These proceedings are often expensive and time-consuming, even
if we were to prevail in such a proceeding. We may also be
forced to initiate legal proceedings to protect our patent
position or other proprietary rights. These proceedings
typically are costly, protracted, and offer no assurance of
success.

Under our collaboration, Amgen is responsible for preparing,
filing, prosecuting, maintaining and defending patent
applications and patents relating to the FKBP neuroimmunophilin
ligand technology. We cannot be sure that Amgen will pursue
these activities in the same manner or as vigorously as we would
if we had that responsibility. Furthermore, Amgen has the option
to take the lead in bringing actions to enforce patent rights
relating to the FKBP neuroimmunophilin ligand technology and to
defend against third party infringement suits regarding that
technology. While Amgen and Guilford

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We rely on licensed intellectual property for
GLIADEL® Wafer and our other product candidates.

We have licensed intellectual property, including patents,
patent applications and know-how, from universities and others,
including intellectual property underlying GLIADEL® Wafer,
DOPASCAN® Injection, AQUAVAN Injection and the
neuroimmunophilin ligand technology. Some of our product
development programs depend on our ability to maintain rights
under these licenses. Under the terms of our license agreements,
we are generally obligated to:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | exercise diligence in the research and development of these
	technologies,                                 
|
| |  | achieve specified development and regulatory milestones,                                                   
|
| |  | expend minimum amounts of resources in bringing potential
	products to market,                             
|
| |  | make specified royalty and milestone payments to the party from
	which we have licensed the technology, and
|
| |  | reimburse patent costs to these parties.                                                                   

In addition, these license agreements require us to abide by
record-keeping and periodic reporting obligations. Each licensor
has the power to terminate its agreement if we fail to meet our
obligations under that license. We may not be able to meet our
obligations under these license agreements, which could deprive
us of access to key technology. Furthermore, these obligations
may conflict with our obligations under other agreements that we
have.

If we default under any of these license agreements, we may lose
our right to market and sell any products based on the licensed
technology. Losing our marketing and sales rights would have a
significant negative effect on our business, financial condition
and results of operations. Our license agreements require that
we pay a royalty on sales of GLIADEL® Wafer to the
university that licensed us the technology underlying that
product. In addition, we will have to pay milestone and/or
royalty payments in connection with the successful development
and commercialization of DOPASCAN® Injection, AQUAVAN
Injection and any products that result from the NIL and PARP
technologies.

In the future, to support our product development efforts, we
may need research materials or scientific information that
researchers at universities or other organizations generate. We
may not be able to obtain this scientific information or
research materials in a timely manner or at all.

We depend on a single source of supply for several of our key
product components.

Currently, we can only purchase some of the key components for
GLIADEL® Wafer and our product candidates from single
source suppliers. These vendors are subject to many strict
regulatory requirements regarding the supply of these
components. We cannot be sure that these suppliers will comply,
or have complied, with applicable regulatory requirements or
that they will otherwise continue to supply us with the key
components we require. If suppliers are unable or refuse to
supply us, or will supply us only at a prohibitive cost, we may
not be able to access additional sources at acceptable prices,
on a timely basis, if ever.

The current formulation of GLIADEL® Wafer utilizes the
chemotherapeutic agent BCNU, which is also known as
carmustine. Currently we have the option to procure
BCNU from only two sources in the United States, and we are not
aware of any supplier outside of the United States. We currently
obtain BCNU from one of these two U.S. suppliers on a
purchase order basis and not through any long-term supply
agreement. If we fail to receive key supplies necessary for the

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The manufacture of DOPASCAN® Injection requires that a
precursor compound be labeled with a radioactive isotope of
iodine, known as Iodine-123, to form the final product. Only a
limited number of companies worldwide are capable of performing
the necessary radioiodination of the precursor and
distribution of the final product. Currently, we do not have any
arrangement for the manufacture and supply of DOPASCAN®
Injection nor do we have the internal capability to manufacture
DOPASCAN® Injection ourselves. Consequently, we will not be
in a position to commence Phase III or other clinical
trials for DOPASCAN® Injection until we locate a qualified
supplier.

We have assessed the companies that we believe are currently
capable of manufacturing a product like DOPASCAN®
Injection. Based on this assessment, we believe a significant
risk exists that we may not be able to find a manufacturer who
can meet the quality and cost requirements required to conduct
the Phase III clinical trials that will be necessary to support
application to the FDA for regulatory approval. Our inability to
contract with a suitable manufacturer for the clinical and
commercial supply of DOPASCAN® Injection on acceptable
terms would prevent us from developing this product candidate
further.

The U.S. government holds rights which may permit it to
license to third parties technology we currently hold the
exclusive right to use.

The U.S. government holds rights that govern aspects of
specific technologies licensed to us by third party licensors.
These government rights in inventions conceived or reduced to
practice under a government-funded program may include a
non-exclusive, royalty-free, worldwide license for the
government to practice or have practiced resulting inventions
for any governmental purpose. In addition, the
U.S. government has the right to grant to others licenses
that may be exclusive under any of these inventions if the
government determines that:



| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | adequate steps have not been taken to commercialize such
	inventions,                 
|
| |  | the grant is necessary to meet public health or safety needs, or                      
|
| |  | the grant 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 we fail to disclose the invention, and may
elect to take title within specified time limits. The
U.S. government may acquire title in any country in which
we do not file a patent application within specified time limits.

Federal law requires any licensor of an invention partially
funded by the federal government to obtain a commitment from any
exclusive licensee, such as us, to manufacture products using
the invention substantially in the United States. Further, these
rights include the right of the government to use and disclose
technical data relating to licensed technology that was
developed in whole or in part at government expense. Our
principal technology license agreements contain provisions
recognizing these rights.

Pre-clinical and clinical trial results for our products may
not be favorable.

In order to obtain regulatory approval for the commercial sale
of any of our product candidates, we must conduct both
pre-clinical studies and human clinical trials. These studies
and trials must demonstrate that the product is safe and
effective for the clinical use for which we are seeking
approval. The results of clinical trials we conduct may not be
successful. Adverse results from any clinical trials would have
a negative effect on our business.

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We also face the risk that we will not be permitted to undertake
or continue clinical trials for any of our product candidates in
the future. Even if we are able to conduct such trials, we may
not be able to demonstrate satisfactorily that the products are
safe and effective and thus qualify for the regulatory approvals
needed to market and sell them. Results from pre-clinical
studies and early clinical trials are often not accurate
indicators of results of later-stage clinical trials that
involve larger human populations.

We are subject to extensive governmental regulation, which
may change and harm our business.

Our research, pre-clinical development and clinical trials, and
the manufacturing and marketing of our product candidates, are
subject to extensive regulation by numerous governmental
authorities in the United States and other countries, including
the FDA and the DEA. Controlled drugs such as GLIADEL®
Wafer and radiolabeled drugs such as DOPASCAN® Injection
are subject to additional requirements. Except for GLIADEL®
Wafer, none of our product candidates has received marketing
clearance from the FDA. In addition, none of our product
candidates has received clearance from any foreign regulatory
authority for commercial sale, except for GLIADEL® Wafer,
which has received marketing clearance in a limited number of
foreign countries.

As a condition to approval of our product candidates under
development, the FDA could require additional pre-clinical,
clinical or other studies. Any requirement that we perform
additional pre-clinical, clinical or other studies, or purchase
clinical or other data from other companies could delay, or
increase the expense of, approval of our product candidates,
which could have a negative effect on our business.

In order to obtain FDA approval of a new drug product for a
specific clinical use, we must demonstrate to the satisfaction
of the FDA that the product is safe and effective for its
intended use. We must also demonstrate that the product is
capable of being manufactured in accordance with applicable
regulatory standards. Significant risks exist that:



| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we will not be able to satisfy the FDAs requirements with
	respect to any of our drug product candidates or with respect to
	the proposed expanded labeling for GLIADEL® Wafer for
	patients undergoing initial surgery for malignant glioma, or
|
| |  | even if the FDA does approve our product candidates or expanded
	labeling, the FDA will approve less than the full scope of uses
	or labeling that we seek.                                                                                      

Failure to obtain regulatory drug approvals on a timely basis
could have a material adverse effect on our business.

Even if we are able to obtain necessary FDA approval, the FDA
may nevertheless require post-marketing testing and surveillance
to monitor the approved product and continued compliance with
regulatory requirements. The FDA may withdraw product approvals
if we or our corporate partners do not maintain compliance with
regulatory requirements. The FDA may also withdraw product
approvals if problems concerning safety or efficacy of the
product occur following approval.

The process of obtaining FDA and other required approvals or
licenses and of meeting other regulatory requirements to test
and market drugs, including controlled substances and
radiolabeled drugs, is rigorous and lengthy. We have expended,
and will continue to expend, substantial resources. We will need
to conduct clinical trials and other studies on all of our
product candidates before we are in a position to file a new
drug application for marketing and sales approval.
Unsatisfactory clinical trial results and other delays in
obtaining regulatory approvals or licenses would prevent the
marketing of the products we are developing. Until we receive
the necessary approvals or licenses and meet other regulatory
requirements, we will not receive revenues or royalties related
to product sales.

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In addition to the requirements for product approval, before a
pharmaceutical product may be marketed and sold in some foreign
countries, the proposed pricing for the product must be approved
as well. Products may be subject to price controls 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. We cannot
guarantee that any country which has price controls or
reimbursement limitations for pharmaceuticals will allow
favorable reimbursement and pricing arrangements for our
products or those of our corporate partners.

Where applicable, we hope to capitalize on current FDA
regulations and the new provisions of the FDA Modernization Act
of 1997. These regulations or provisions permit fast
track, expedited or accelerated approval or more limited
treatment use of, and cost recovery for, certain
experimental drugs under limited circumstances. The fast track
and treatment provisions, and FDAs accelerated, expedited
and treatment regulations apply generally only to:



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | drug products intended to treat severely debilitating or serious
	or life-threatening diseases, and                                                                                                                                
|
| |  | drug products that provide meaningful therapeutic benefit to
	patients over existing treatments, that potentially address an
	unmet medical need, or that are for diseases for which no
	satisfactory or comparable therapy exists.

The FDA Modernization Act contains provisions patterned after
the accelerated approval regulations and other provisions
pertaining to expanded access, i.e., treatment uses.
Because some of the new statutory provisions and current FDA
regulations are different from one another, we are uncertain as
to how they will apply, if at all, to our drug candidates. Our
drug candidates may not qualify for fast track, accelerated or
expedited approvals or for treatment use and cost recovery.

Because controlled drug products and radiolabeled drugs are
subject to special regulations in addition to those applicable
to other drugs, the DEA and the Nuclear Regulatory Commission
may regulate some of our products and product candidates,
including DOPASCAN® Injection, as controlled substances and
as radiolabeled drugs. The NRC licenses persons who use nuclear
materials and establishes standards for radiological health and
safety. The DEA is responsible for the manufacture, distribution
and dispensing of controlled substances, including the equipment
and raw materials used in their manufacture and packaging in
order to prevent such articles from being diverted into illicit
channels of commerce. Registration is required and other
activities involving controlled substances are subject to a
variety of record keeping and security requirements, and to
permits and authorizations and other requirements. States often
have requirements for controlled substances as well. The DEA
grants certain exceptions from the requirements for permits and
authorizations to export or import materials related to or
involving controlled substances. Our potential future inability
to obtain exceptions from the DEA for shipment abroad or other
activities could have a negative effect on us.

We have obtained registrations for our facilities from the DEA.
We have also obtained exceptions from the DEA with respect to
several of our activities involving DOPASCAN® Injection,
including the shipment of specified quantities of a precursor of
this product candidate to an overseas collaborative partner.
However, we cannot be sure that these exceptions will be
sufficient to cover our future activities or that the DEA will
not revoke the exceptions. We also cannot be sure that we will
be able to meet the other requirements to test, manufacture and
market controlled substances or radiolabeled drugs, or that we
will be able to obtain additional necessary approvals, permits,
authorizations, registrations or licenses to meet state, federal
and international regulatory requirements to manufacture and
distribute these products. The FDA Modernization Act required
the FDA to issue and finalize within one and one-half years
regulations governing the approval of radiolabeled drugs. The
FDA issued final regulations in May 1999. These cover general
factors relevant to safety and effectiveness, possible
indications for radiopharmaceuticals, and the evaluation
criteria for safety and effectiveness. We do not know and cannot
predict how these and other provisions may affect the potential
for approval of DOPASCAN® Injection.

36



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Our competitors are pursuing alternative approaches to the
same issues we are working on. Our products use novel
alternative technologies and therapeutic approaches which have
not been widely studied.

Many of our product development efforts focus on novel
alternative therapeutic approaches and new technologies that
have not been widely studied. Applications for these approaches
and technologies include, among other things, the treatment of
brain cancer, the diagnosis and monitoring of Parkinsons
disease, the promotion of nerve growth and the prevention of
neuronal damage. These approaches and technologies may not be
successful. We are applying these approaches and technologies in
our attempt to discover new treatments for conditions that are
also the subject of research and development efforts of many
other companies. Our competitors may succeed in developing
technologies or products that are more effective or economical
than those we are developing. Rapid technological change or
developments by others may result in our technology or product
candidates becoming obsolete or noncompetitive.

Our business is dependent on our ability to keep pace with
the latest technological changes.

The technological areas in which we work continue to evolve at a
rapid pace. Our future success depends upon maintaining our
ability to compete 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 institutions
is intense and expected to increase. Many of these competitors
have substantially greater research and development capabilities
and experience and manufacturing, marketing, financial and
managerial resources than we do.

Acquisitions of competing companies by large pharmaceutical
companies or other companies could enhance the financial,
marketing and other resources available to these competitors.
These competitors may develop products that are superior to
those we are developing. We are aware of the development by
other companies and research scientists of alternative
approaches to:



| |   |                                                 
| | - | ------------------------------------------------
| |  | the treatment of malignant glioma,              
|
| |  | the diagnosis of Parkinsons disease,           
|
| |  | the promotion of nerve growth and repair, and   
|
| |  | the treatment and prevention of neuronal damage.

Our competitors may develop products that render our products or
technologies noncompetitive or obsolete. In addition, we may not
be able to keep pace with technological developments.

Our products must compete with others to gain market acceptance.

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. 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 approval processes, and supply commercial quantities
of the products to the market will be an important element of
market success.

Significant competitive factors include:



| |   |                                         
| | - | ----------------------------------------
| |  | capabilities of our collaborators,      
|
| |  | product efficacy and safety,            
|
| |  | timing and scope of regulatory approval,

37



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| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | product availability,                                                            
|
| |  | marketing and sale capabilities,                                                 
|
| |  | reimbursement coverage from insurance companies and others,                      
|
| |  | the amount of clinical benefit of our product candidates
	relative to their cost,
|
| |  | the method of administering a product,                                           
|
| |  | price, and                                                                       
|
| |  | patent protection.                                                               

Our competitors may develop more effective or more affordable
products or achieve earlier product development completion,
patent protection, regulatory approval or product
commercialization than we do. Our competitors achievement
of any of these goals could have a material adverse effect on
our business.

We have limited resources in the areas of product testing and
regulatory compliance. Consequently, in order to carry our
products through the necessary regulatory approvals and prepare
our product candidates for commercialization and marketing, we
will have to:



| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | expend capital to acquire and expand such capabilities,                               
|
| |  | reach collaborative arrangements with third parties to provide
	these capabilities, or
|
| |  | contract with third parties to provide these capabilities.                            

We are subject to risks of product liability both because of
our product line and our limited insurance coverage.

We may potentially become subject to large liability claims and
significant defense costs as a result of the design, manufacture
or marketing of our products, including GLIADEL® Wafer, or
the conduct of clinical trials involving these products. A
product liability-related claim or recall could have a negative
effect on us. We currently maintain only $15 million of
product liability insurance covering clinical trials and product
sales. This existing coverage or any future insurance coverage
we obtain may not be adequate. Furthermore, our insurance may
not cover a claim made against us.

Product liability insurance varies in cost. It can be difficult
to obtain, and we may not be able to purchase it in the future
on terms acceptable to us, or at all. We also may not be able to
otherwise protect against potential product liability claims. If
this occurs, it could prevent or inhibit the clinical
development and/or commercialization of any products we are
developing.

We depend on qualified personnel and consultants, especially
Craig R. Smith, M.D. and Solomon H. Snyder, M.D.

We depend heavily on the principal members of our management and
scientific staff, including Craig R. Smith, M.D., our Chief
Executive Officer, and Solomon H. Snyder, M.D., who is a member
of our Board of Directors and a consultant to our company. Both
Dr. Smith and Dr. Snyder have extensive experience in
the biotechnology industry and provide us with unique access to
their contacts in the scientific community. The loss of the
services of either of these individuals or other members of our
senior management team could have a negative effect on our
business.

We have entered into a consulting agreement with Dr. Snyder
and an employment agreement with Dr. Smith, each of which
provides protection for our proprietary rights. Nevertheless,
either Dr. Snyder or Dr. Smith may terminate his
relationship with us at any time. Accordingly, we cannot be sure
that either of these individuals or any of our other employees
or consultants will remain with

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##### Table of Contents





Our planned activities will require individuals with expertise
in many areas including:



| |   |                                                    
| | - | ---------------------------------------------------
| |  | medicinal chemistry and other research specialties,
|
| |  | pre-clinical testing,                              
|
| |  | clinical trial management,                         
|
| |  | regulatory affairs,                                
|
| |  | sales and marketing,                               
|
| |  | manufacturing, and                                 
|
| |  | business development.                              

These planned activities will require additional personnel,
including management personnel, and will also require existing
management personnel to develop added expertise. Recruiting and
retaining qualified personnel, collaborators, advisors and
consultants will be critical to our activities. We may not be
able to attract and retain the personnel necessary for the
development of our business. Furthermore, many pharmaceutical,
biotechnology and health care companies and academic and other
research institutions compete intensely for experienced
scientists. If we are not able to hire the necessary experienced
scientists or develop the necessary expertise, this inability
could have a negative effect on us. In addition, we also depend
on the support of our collaborators at research institutions and
our consultants.

Our business involves using hazardous and radioactive
materials and animal testing, all of which may result in
environmental liability.

Our research and development processes involve the controlled
use of hazardous and radioactive materials. We and our
collaborative partners are subject to extensive laws governing
the use, manufacture, storage, handling and disposal of
hazardous and radioactive materials. There is a risk of
accidental contamination or injury from these materials. Also,
we cannot control whether our collaborative partners comply with
the governing standards. If we or our collaborative partners do
not comply with the governing laws and regulations, we could
face significant fines and penalties that could have a negative
effect on our business, operations or finances. In addition, we
and/or our collaborative partners could be held liable for
damages, fines or other liabilities, which could exceed our
resources.

However, we may have to incur significant costs to comply with
environmental laws and regulations in the future. In addition,
future environmental laws or regulations may have a negative
effect on our operations, business or assets.

Many of the research and development efforts we sponsor involve
the use of laboratory animals. Changes in laws, regulations or
accepted clinical procedures may adversely affect these research
and development efforts. Social pressures that would restrict
the use of animals in testing or actions against us or our
collaborators by groups or individuals opposed to testing using
animals could also adversely affect these research and
development efforts.

Effecting a change of control of Guilford would be difficult,
which may discourage offers for shares of our common stock.

Our certificate of incorporation and the Delaware General
Corporation Law contain provisions that may delay or prevent an
attempt by a third party to acquire control of us. These
provisions

39



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##### Table of Contents







| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | our Board of Directors approves of the transaction before the
	third party acquires 15% of our stock,                                  
|
| |  | the third party acquires at least 85% of our stock at the time
	its ownership goes past the 15% level, or                              
|
| |  | our Board of Directors and two-thirds of the shares of our
	common stock not held by the third party vote in favor of the
	transaction.

We have also adopted a stockholder rights plan intended to deter
hostile or coercive attempts to acquire us. Under the plan, if
any person or group acquires more than 20% of our common stock
without approval of the Board of Directors under specified
circumstances, our other stockholders have the right to purchase
shares of our common stock, or shares of the acquiring company,
at a substantial discount to the public market price. The plan
makes an acquisition much more costly to a potential acquirer.

Our certificate of incorporation also authorizes us to issue up
to 4,700,000 shares of preferred stock in one or more different
series with terms fixed by the Board of Directors. Stockholder
approval is not necessary to issue preferred stock in this
manner. Issuance of these shares of preferred stock could have
the effect of making it more difficult for a person or group to
acquire control of us. No shares of our preferred stock are
currently outstanding. While our Board of Directors has no
current intentions or plans to issue any preferred stock,
issuance of these shares could also be used as an anti-takeover
device.

40



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##### Table of Contents






PART II




Item 5.  Market for Registrants Common
Equity and Related Stockholder Matters

The information set forth under the caption Stock
Description and Form 10-K on the inside back cover of
our 2000 Annual Report to Stockholders is included herein as
Exhibit 13.01, and that portion is incorporated by
reference into Part II of this report.

We have never declared or paid any cash dividends and do not
intend to do so for the foreseeable future. Under our various
loan and lease agreements with certain financial institutions,
we may not declare, during the term of these agreements, any
cash dividends on our common stock without the prior written
consent of these financial institutions and, in certain cases,
the Maryland Industrial Development Financing Authority.




Item 6.  Selected Consolidated Financial
Data

The information set forth under the caption Selected
Financial Data set forth in the 2000 Annual Report to
Stockholders is included herein as Exhibit 13.01, and that
portion is incorporated by reference into Part II of this
report. Such information should be read in conjunction with our
consolidated financial statements and notes thereto.




Item 7.  Managements Discussion and
Analysis of Results of Operations 
 and Financial Condition

The information set forth under the caption
Managements Discussion and Analysis of Results of
Operations and Financial Condition set forth in the 2000
Annual Report to Stockholders is included herein as
Exhibit 13.01, and that portion is incorporated by
reference into Part II of this report.




Item 7A.  Quantitative and Qualitative
Disclosures About Market Risk

A substantial portion of our assets are investment grade debt
instruments such as direct obligations of the
U.S. Treasury, securities of federal agencies which carry
the direct or implied guarantee of the U.S. government,
bank certificates of deposit and corporate securities, including
commercial paper and corporate debt instruments. The market
value of such investments fluctuates with current market
interest rates. In general, as rates increase, the market value
of a debt instrument would be expected to decrease. The opposite
is also true. To minimize such market risk, we have in the past
and, to the extent possible, will continue in the future to hold
such debt instruments to maturity at which time the debt
instrument will be redeemed at its stated or face value. Due to
the short duration and nature of these instruments, we do not
believe that we have a material exposure to interest rate risk
related to our investment portfolio. The investment portfolio at
December 31, 2000 was $76.6 million and the
weighted-average interest rate was approximately six percent
(6%).

Substantially all of our financial obligations were established
with interest rates which fluctuate with market conditions. As a
hedge against such fluctuations in interest rates, we have
entered into certain interest rate swap agreements with a
commercial bank (counter party), to exchange
substantially all of our variable rates of interest on certain
financial obligations for fixed rates. Our borrowings under our
bond and term loans and financial obligations under certain
lease arrangements are approximately $25.8 million.
Pursuant to these borrowing arrangements, we are obligated to
pay variable interest rates on substantially all of these
obligations of LIBOR plus between 5/8% and 3/4%. The interest
rate swap agreements have a total notional principal amount of
approximately $26.6 million as of December 31, 2000.
Pursuant to these interest rate swap agreements, we pay a fixed
rate of interest to the counter party of approximately 6% and
receive from the counter party a variable rate of interest of
LIBOR plus 5/8%. The differential to be paid or received as
interest rates

41



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##### Table of Contents





The aggregate fair value of these interest rate swap agreements
was approximately $83,000 at December 31, 2000. Current
market pricing models were used to estimate these fair values.

We describe our exposure to interest rate risk in Notes 4
and 8, Interest Rate Swap Agreements and
Indebtedness, respectively, to the footnotes to our
consolidated financial statements, which we have included as
Exhibit 13.01 to our annual report on 2000 Form 10-K.




Item 8.  Financial Statements and
Supplementary Data

Our 2000 Consolidated Financial Statements, Independent
Auditors Report by KPMG LLP and Supplementary Data set
forth in our 2000 Annual Report to Stockholders, is included
herein as Exhibit 13.01, and those portions are
incorporated by reference into Part II of this report.




Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

Not Applicable.

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##### Table of Contents






PART III




Item 10.  Directors and Executive Officers of
the Registrant

The information concerning our executive officers is contained
in Item 1A of Part I. The information concerning our
directors and with regard to Item 405 of
Regulation S-K is to be contained under the caption
Board of Directors and Section 16(a)
Beneficial Ownership Reporting Compliance in the
Companys 2001 Proxy Statement, which will be filed no
later than 120 days following December 31, 2000, and
such information is hereby incorporated herein by reference.

The directors and executive officers of the Company as of
March 28, 2001 are as follows:

|                               |  |     |    |          |  |                                                                                         
|------------------------------ |  | --- | -- | -------- |  | ----------------------------------------------------------------------------------------
|Name                           |  | Age |    | Position
|                               |  |     |    |         
|Directors:                     |  |     |    |          |  |                                                                                         
|                              
|                              
|                              
|                              
|Craig R. Smith, M.D.           |  |     | 55 |          |  | Chairman of the Board, President, and
	Chief Executive Officer                          
|                              
|                              
|                              
|                              
|George L. Bunting, Jr.         |  |     | 60 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|Richard L. Casey               |  |     | 54 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|Elizabeth M. Greetham          |  |     | 51 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|Joseph Klein, III              |  |     | 40 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|Ronald M. Nordmann             |  |     | 59 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|Solomon H. Snyder, M.D.        |  |     | 62 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|W. Leigh Thompson, M.D., Ph.D. |  |     | 62 |          |  | Director                                                                                
|                              
|                              
|                              
|                              
|Executive Officers:            |  |     |    |          |  |                                                                                         
|                              
|                              
|                              
|                              
|David P. Wright                |  |     | 53 |          |  | Executive Vice President Commercial Operations                                          
|                              
|                              
|                              
|                              
|John P. Brennan                |  |     | 58 |          |  | Senior Vice President, Technical Operations and
	General Manager, Drug Delivery Business
|                              
|                              
|                              
|                              
|Andrew R. Jordan               |  |     | 53 |          |  | Senior Vice President, Chief Financial Officer and Treasurer                            
|                              
|                              
|                              
|                              
|Peter D. Suzdak, Ph.D.         |  |     | 42 |          |  | Senior Vice President, Research & Development                                           
|                              
|                              
|                              
|                              
|Thomas C. Seoh                 |  |     | 43 |          |  | Senior Vice President, Corporate Development, General Counsel
	and Secretary            
|                              
|                              
|                              
|                              
|Nancy J. Linck, Ph.D., J.D.    |  |     | 59 |          |  | Senior Vice President, Intellectual Property and
	Deputy General Counsel                
|                              
|                              
|                              
|                              
|William C. Vincek, Ph.D.       |  |     | 53 |          |  | Vice President, Pharmaceutical & Chemical Development                                   
|                              
|                              
|                              
|                              
|Denise Battles                 |  |     | 46 |          |  | Vice President, Corporate Quality                                                       
|                              
|                              
|                              
|                              
|Dana C. Hilt, M.D.             |  |     | 48 |          |  | Vice President, Clinical Research and Drug Metabolism                                   
|                              
|                              
|                              
|                              
|Margaret M. Contessa           |  |     | 52 |          |  | Vice President, Human Resources                                                         




Item 11.  Executive Compensation

The information required by this item is hereby incorporated by
reference from the information to be contained under the caption
Executive Compensation in the Companys 2001
Proxy Statement, which will be filed no later than 120 days
following December 31, 2000.




Item 12.  Security Ownership of Certain
Beneficial Owners and Management

The information required by this item is hereby incorporated by
reference from the information to be contained under the caption
Beneficial Ownership of Common Stock in the
Companys 2001 Proxy Statement, which will be filed no
later than 120 days following December 31, 2000.

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##### Table of Contents






Item 13.  Certain Relationships and Related
Transactions

The information required by this item is hereby incorporated by
reference from the information to be contained under the caption
Beneficial Ownership of Common Stock and
Certain Relationships and Related Party Transactions
in the Companys 2001 Proxy Statement, which will be filed
no later than 120 days following December 31, 2000.

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##### Table of Contents






PART IV






Item 14.  Exhibits, Financial Statement
Schedules, and Reports on Form 8-K


(a)(1) Financial Statements

The following Consolidated Financial Statements and Independent
Auditors Report set forth on the pages indicated in our
2000 Annual Report to Stockholders are included in
Exhibit 13.01 to this report and are incorporated into
Item 8 of this report:

Independent Auditors Report

Consolidated Balance Sheets as of December 31, 2000 and 1999

Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998.

Consolidated Statements of Changes in Stockholders Equity
for the Years Ended December 31, 2000, 1999 and 1998.

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998.

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

Independent Auditors Report

Schedule II  Valuation and Qualifying Accounts

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##### Table of Contents



Independent Auditors Report

The Board of Directors and Stockholders



Under date of February 9, 2001, we reported on the
consolidated balance sheets of Guilford Pharmaceuticals Inc. and
subsidiaries (the Company) as of December 31,
2000 and 1999, and the related consolidated statements of
operations, changes in stockholders equity, and cash flows
for each of the years in the three-year period ended
December 31, 2000, which are included in the
Form 10-K. Our report refers to a change in the
Companys revenue recognition policy for non-refundable up
front fees in 2000. In connection with our audits of the
aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as
listed in the accompanying index. This financial statement
schedule is the responsibility of the Companys management.
Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ KPMG LLP

Philadelphia, Pennsylvania



46



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##### Table of Contents



GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


SCHEDULE II


(in thousands)


|                  |  |            |     |           |  |            |   |            |  |  |   |  |  |   |     | 
|----------------- |  | ---------- | --- | --------- |  | ---------- | - | ---------- |  |  | - |  |  | - | --- | 
|                  |  | Balance    |     |           |  |            |   | Balance   
|Classification    |  | @ 12/31/97 |     | Additions |  | Deductions |   | @ 12/31/98
|                  |  |            |     |           |  |            |   |           
|Inventory Reserve |  | $          | 257 |           |  | $          |  |            |  |  |  |  |  | $ | 257 | 
|                 
|                 
|                 
|                 
|Product Returns   |  | $          |    |           |  |            |   |            |  |  |   |  |  | $ |    | 

|                  |  |            |     |           |  |            |  |            |  |  |   |  |  |   |     | 
|----------------- |  | ---------- | --- | --------- |  | ---------- |  | ---------- |  |  | - |  |  | - | --- | 
|                  |  | Balance    |     |           |  |            |  | Balance   
|Classification    |  | @ 12/31/98 |     | Additions |  | Deductions |  | @ 12/31/99
|                  |  |            |     |           |  |            |  |           
|Inventory Reserve |  | $          | 257 |           |  | $          |  |            |  |  |  |  |  | $ | 257 | 
|                 
|                 
|                 
|                 
|Product Returns   |  | $          |    |           |  |            |  |            |  |  |   |  |  | $ |    | 

|                  |  |            |     |           |  |            |     |            |  |   |     |  |  |   |     | 
|----------------- |  | ---------- | --- | --------- |  | ---------- | --- | ---------- |  | - | --- |  |  | - | --- | 
|                  |  | Balance    |     |           |  |            |     | Balance   
|Classification    |  | @ 12/31/99 |     | Additions |  | Deductions |     | @ 12/31/00
|                  |  |            |     |           |  |            |     |           
|Inventory Reserve |  | $          | 257 |           |  | $          | 158 |            |  | $ | 257 |  |  | $ | 158 | 
|                 
|                 
|                 
|                 
|Product Returns   |  | $          |    |           |  | $          | 499 | (1)        |  |   |     |  |  | $ | 499 | 






|    |                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Established a reserve for potential product returns due to the
	reacquisition of GLIADEL® Wafer and was considered part of
	the cost of acquisition (see Note 15 to the footnotes to
	our consolidated financial statements).

All other schedules are omitted because they are not applicable
or the required information is included in the consolidated
financial statements or notes thereto.

47



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##### Table of Contents



(a)(3)  Exhibits

The following exhibits are filed with this Form 10-K or
incorporated herein by reference to the document set forth next
to the exhibit listed below:

|        |         |             |  |                                                                                                                                                                                                   
|------- | ------- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number* |         | Description
|        |         |            
|        | 3.01A   |             |  | Amended and Restated Certificate of Incorporation of the Company.                                                                                                                                 
|        | 3.01B   |             |  | Certificate of Amendment to Amended and Restated Certificate of
	Incorporation.                                                                                                                   
|        | 3.02    |             |  | Amended and Restated By-laws of the Company (filed herewith).                                                                                                                                     
|        | 4.01    |             |  | Specimen Stock Certificate.                                                                                                                                                                       
|        | 4.02A   |             |  | Stockholder Rights Agreement dated September 26, 1995.                                                                                                                                            
|        | 4.02B   |             |  | Form of Amendment No. 1 to Stockholder Rights Agreement
	(incorporated by reference to Form 8-K, filed
	October 20, 1998)                                                                         
|        | 10.01A  |             |  | 1993 Employee Share Option and Restricted Share Plan (1993
	Option Plan).                                                                                                                       
|        | 10.01B  |             |  | Amendments to 1993 Option Plan.                                                                                                                                                                   
|        | 10.01C  |             |  | 1998 Employee Share Option and Restricted Share Plan (1998
	Option Plan) (incorporated by reference to Form S-8,
	filed on February 12, 1999).                                                  
|        | 10.01D  |             |  | Amendment to 1998 Option Plan (incorporated by reference to
	Form 10-K filed on March 30, 1999).                                                                                                  
|        | 10.02A  |             |  | Series A Preferred Stock Purchase Agreement, dated
	September 30, 1993, as amended between the Company and
	holders of its Series A Preferred Stock
	(Series A Agreement).                      
|        | 10.02B  |             |  | Amendment, dated August 25, 1994, to Series A
	Agreement.                                                                                                                                         
|        | 10.02C  |             |  | Amendment, dated February 15, 1995, to Series A
	Agreement.                                                                                                                                       
|        | 10.03A |             |  | License Agreement, effective March 18, 1994, between the
	Company and Research Triangle Institute, a not-for-profit
	Corporation existing under the laws of North Carolina.                       
|        | 10.03B  |             |  | Appendix A to Exhibit 10.04.                                                                                                                                                                      
|        | 10.04  |             |  | License Agreement, dated March 15, 1994, between the
	Company and Scios Nova.                                                                                                                     
|        | 10.05   |             |  | Employment Agreement between the Company and Craig R.
	Smith, M.D.                                                                                                                                
|        | 10.06   |             |  | Employment Agreement between the Company and Andrew R.
	Jordan.                                                                                                                                   
|        | 10.07   |             |  | Employment Agreement between the Company and John P.
	Brennan.                                                                                                                                    
|        | 10.08   |             |  | (Intentionally Omitted)                                                                                                                                                                           
|        | 10.09   |             |  | Employment Agreement between the Company and William C.
	Vincek, Ph.D.                                                                                                                            
|        | 10.10   |             |  | Employment Agreement between the Company and Peter D.
	Suzdak.                                                                                                                                    
|        | 10.11   |             |  | (Intentionally Omitted)                                                                                                                                                                           
|        | 10.12   |             |  | Employment Agreement between the Company and Thomas C. Seoh.                                                                                                                                      
|        | 10.13A  |             |  | Amendments to certain executive officer employment letter
	Agreements.                                                                                                                            
|        | 10.13B  |             |  | Form of Change in Control Severance Agreement (incorporated be
	reference to the Form 10-Q for the quarter ended
	September 30, 1998).                                                            
|        | 10.13C  |             |  | Severance Provisions from Employment Letter Agreement, effective
	September 21, 1998, with Nancy J. Linck (incorporated
	by reference to the Form 10-Q for the quarter ended
	September 30, 1998).
|        | 10.14   |             |  | (Intentionally Omitted)                                                                                                                                                                           
|        | 10.15A  |             |  | Consulting Agreement, dated August 1, 1993, as amended on
	February 28, 1994, between the Company and Solomon H.
	Snyder, M.D. (the Snyder Consulting Agreement).                               
|        | 10.15B  |             |  | September 1, 1995 amendment to Snyder Consulting Agreement.                                                                                                                                       
|        | 10.15C  |             |  | November 19, 1997 amendment to Snyder Consulting Agreement.                                                                                                                                       
|        | 10.15D  |             |  | September 1, 1998 and January 1, 1999 amendments to
	Snyder Consulting Agreement (incorporated by reference to
	Form  10-K filed March 30, 1999).                                                 

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|        |          |             |  |                                                                                                                                                                                                                                                         
|------- | -------- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          |            
|Number* |          | Description
|        |          |            
|        | 10.16A  |             |  | License Agreement, dated December 20, 1993, between the
	Company and The Johns Hopkins University (JHU
	Agreement).                                                                                                                                   
|        | 10.16B   |             |  | Appendix B to JHU Agreement.                                                                                                                                                                                                                            
|        | 10.16C  |             |  | Amended and Restated License Agreement, effective November 
	25, 1998, between the Company and Johns Hopkins (incorporated by
	reference to Form 10-K filed March 30, 1999).                                                                            
|        | 10.17    |             |  | Form of Director and Officer Indemnification Agreement.                                                                                                                                                                                                 
|        | 10.18    |             |  | Form of Tax Indemnity Agreement.                                                                                                                                                                                                                        
|        | 10.19A   |             |  | Guilford Pharmaceuticals Inc. Directors Stock Option Plan.                                                                                                                                                                                             
|        | 10.19B   |             |  | Amendments to Directors Stock Option Plan (incorporated by
	reference to Form 10-K filed on March 30, 1999)                                                                                                                                            
|        | 10.19C   |             |  | Amendment to Form of Directors Stock Option Agreement
	(incorporated by reference to Form 10-K filed
	March 30, 1999).                                                                                                                                 
|        | 10.20    |             |  | Lease Agreement, dated August 30, 1994, between Crown
	Royal, L.P. and the Company.                                                                                                                                                                     
|        | 10.21A   |             |  | Lease Agreement, dated June 9, 1997 between
	SN Properties, Inc. and the Company (Freeport
	Lease).                                                                                                                                                   
|        | 10.21B   |             |  | Amendment, dated February 10, 1998, to Freeport Lease.                                                                                                                                                                                                  
|        | 10.22(1) |             |  | (Intentionally Omitted).                                                                                                                                                                                                                                
|        | 10.23(1) |             |  | Employment Letter Agreement, effective January 27, 1998,
	between the Company and Dana C. Hilt, M.D.                                                                                                                                                    
|        | 10.24    |             |  | Exchange and Registration Rights Agreement, dated February 
	17, 1995, among the Company and the Abell Foundation, Inc., and
	the several holders named in Appendix I.                                                                                  
|        | 10.25A   |             |  | Loan and Financing Agreement between the Maryland Economic
	Development Corporation (MEDCO), the Company and
	Signet Bank/ Maryland (Signet) (L&F
	Agreement).                                                                                    
|        | 10.25B   |             |  | Amendment No. 1, dated June 30, 1998, to L&F
	Agreement (incorporated by reference to the Form 10-Q for
	the quarter ended June, 1998)                                                                                                                  
|        | 10.26    |             |  | Leasehold Deed of Trust by and between the Company and
	Janice E. Godwin and Ross Chaffin (as trustees) for the
	benefit of MEDCO and Signet.                                                                                                           
|        | 10.27A   |             |  | Insurance Agreement between the Maryland Industrial Development
	Financing Authority and Signet (Insurance Agreement).                                                                                                                                
|        | 10.27B   |             |  | Letter, dated April 2, 1996, amending Insurance Agreement.                                                                                                                                                                                              
|        | 10.27C   |             |  | Amendment No. 2, dated June 29, 1998, to Insurance
	Agreement (incorporated by reference to the Form 10-Q for
	the quarter ended June 30, 1998).                                                                                                        
|        | 10.28   |             |  | License Agreement, dated December 9, 1995, by and between
	the Company and Daiichi Radioisotope Laboratories, Ltd.                                                                                                                                      
|        | 10.29   |             |  | License and Distribution Agreement, dated October 13, 1995,
	by and between the Company and Orion Corporation Farmos.                                                                                                                                   
|        | 10.30    |             |  | (Intentionally Omitted).                                                                                                                                                                                                                                
|        | 10.31    |             |  | Master Lease Agreement, dated March 19, 1998, by and
	between Comdisco Laboratory and Scientific Group, a Division of
	Comdisco Healthcare Group, Inc., and the Company (incorporated
	by reference to Form 10-Q for the quarter ended
	March 31, 1998).
|        | 10.32   |             |  | Bulk Pharmaceutical Sales Contract, dated September 23,
	1994, between the Company and Aerojet-General Corporation.                                                                                                                                     
|        | 10.33    |             |  | Equipment Lease, dated September 18, 1996, between the
	Company and General Electric Capital Corporation.                                                                                                                                               
|        | 10.34    |             |  | Term Loan, dated April 30, 1996, as amended on
	December 6, 1996, by and between the Company and Signet
	Bank.                                                                                                                                          

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|        |         |             |  |                                                                                                                                                                                                                                                                                                                
|------- | ------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number* |         | Description
|        |         |            
|        | 10.35A  |             |  | Marketing, Sales and Distribution Rights Agreement between
	Aventis S.A. (formerly known as Rhône-Poulenc Rorer
	Pharmaceuticals Inc.) (Aventis), the Company and
	GPI  Holdings, Inc., dated June 13, 1996
	(MSDA).                                                                                       
|        | 10.35B |             |  | Amendment No. 1 to MDSA, dated September 25, 1998
	(incorporated by reference to Form 8-K, filed
	October 2, 1998).                                                                                                                                                                                            
|        | 10.36   |             |  | Manufacturing and Supply Agreement between Aventis and the
	Company, dated June 13, 1996.                                                                                                                                                                                                                      
|        | 10.37A  |             |  | Stock Purchase Agreement between the Company and Aventis, dated
	June 13, 1996 (Aventis Stock Purchase
	Agreement).                                                                                                                                                                                          
|        | 10.37B  |             |  | Amendment No. 1 to Aventis Stock Purchase Agreement, dated
	September 25, 1998 (incorporated by reference to
	Form 8-K, filed October 2, 1998).                                                                                                                                                                
|        | 10.38   |             |  | Loan Agreement between the Company and Aventis Inc., dated
	June 13, 1996.                                                                                                                                                                                                                                     
|        | 10.39   |             |  | (Intentionally Omitted)                                                                                                                                                                                                                                                                                        
|        | 10.40  |             |  | Collaboration and License Agreement, dated December 15,
	1997 and effective as of August 20, 1997, between Amgen
	Inc. (Amgen), GPI NIL Holdings, Inc. and the Company.                                                                                                                                      
|        | 10.41   |             |  | Stock and Warrant Purchase Agreement, dated October 1,
	1997, between Amgen and the Company.                                                                                                                                                                                                                   
|        | 10.42   |             |  | Registration Rights Agreement, dated October 1, 1997,
	between Amgen and the Company.                                                                                                                                                                                                                          
|        | 10.43   |             |  | Warrant, dated October 1, 1997 issued to Amgen.                                                                                                                                                                                                                                                                
|        | 10.44   |             |  | Security Agreement, dated as of February 5, 1998, between
	First Security Bank, National Association (First
	Security), not individually, but solely as the Owner
	Trustee under the Guilford Real Estate Trust 1998-1 (the
	Trust) and First Union.                                                       
|        | 10.45   |             |  | Amended and Restated Trust Agreement, dated as of February 
	5, 1998 between the Several Holders from time to time parties
	thereto and the Trust.                                                                                                                                                             
|        | 10.46   |             |  | Agency Agreement, dated as of February 5, 1998, between the
	Company and the Trust.                                                                                                                                                                                                                            
|        | 10.47   |             |  | Credit Agreement, dated as of February 5, 1998, among the
	Trust, the Several Holders from time to time parties thereto and
	First Union.                                                                                                                                                                      
|        | 10.48   |             |  | Participation Agreement, dated as of February 5, 1998,
	among the Company, the Trust, the various and other lending
	institutions which are parties hereto from time to time, as
	Holders, the various and other lending institutions which are
	parties hereto from time to time, as Lenders, and First Union.
|        | 10.49   |             |  | Lease Agreement, dated as of February 5, 1998, between the
	Trust and the Company.                                                                                                                                                                                                                             
|        | 10.50   |             |  | MIDFA Agreement, dated June 29, 1998, by and between MIDFA,
	First Security, the Company and First Union (incorporated by
	reference to Form 10-Q for the quarter ended June 30,
	1998).                                                                                                                       
|        | 10.51   |             |  | Insurance Agreement, dated June 29, 1998, by and between
	MIDFA and First Union (incorporated by reference to Form 
	10-Q for the quarter ended June 30, 1998).                                                                                                                                                
|        | 10.52   |             |  | April 1, 1999 amendment to Consulting Agreement, dated
	August 1, 1993, as amended, between the Company and
	Solomon H. Snyder, M.D. (incorporated by reference to
	Form 10-Q for the quarter ended March 31, 1999).                                                                                           
|        | 10.53   |             |  | Amendment to Directors Stock Option Plan (incorporated by
	reference to Form 10-Q for the quarter ended March 31,
	1999).                                                                                                                                                                                     
|        | 10.54   |             |  | Amendment to Form of Stock Option Agreement under the
	Companys 1993 and 1998 Employee Share Option and
	Restricted Share Plans (incorporated by reference to
	Form 10-Q for the quarter ended March 31, 1999).                                                                                               

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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                                                                                              
|------- | ----- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number* |       | Description
|        |       |            
|        | 10.55 |             |  | Amendment to Form of Directors Stock Option Agreement,
	effective May 18, 1999 (incorporated by reference to
	Form  10-Q for the quarter ended June 30, 1999).                                                                                                              
|        | 10.56 |             |  | July 1, 1999 amendment to Consulting Agreement, dated
	August 1, 1993 between the Company and Solomon H.
	Snyder,  M.D. (incorporated by reference to Form 10-Q
	for the quarter ended June 30, 1999).                                                                       
|        | 10.57 |             |  | Consulting Agreement, dated July 23, 1999, between the
	Company and Solomon H. Snyder, M.D. (incorporated by
	reference to Form 10-Q for the quarter ended June 30,
	1999).                                                                                                  
|        | 10.58 |             |  | Form of Severance Agreement (incorporated by reference to
	Form 10-Q for the quarter ended September 30, 1999).                                                                                                                                                              
|        | 10.59 |             |  | Form of Change in Control Severance Agreement (incorporated by
	reference to Form 10-Q for the quarter ended
	September  30, 1999).                                                                                                                                          
|        | 10.60 |             |  | License, Development and Commercialization Agreement dated
	March 2, 2000, between the Company and ProQuest
	Pharmaceuticals Inc. (incorporated by reference to Form 
	10-Q for the quarter ended March 31, 2000).                                                           
|        | 10.61 |             |  | Rights Reversion Agreement dated October 23, 2000, by and
	between Aventis Pharmaceutical Products Inc., Rhone-Poulenc
	Rorer Inc., GPI Holdings, Inc. and Guilford Pharmaceuticals
	Inc. (incorporated by reference to Form 10-Q for the
	quarter ended September 30, 2000).
|        | 10.62 |             |  | Agreement dated October 24, 2000, by and between Cardinal
	Health Sales and Marketing Services, a division of RedKey Inc.
	and Guilford Pharmaceuticals Inc. (incorporated by reference to
	Form 10-Q for the quarter ended September 30, 2000).                             
|        | 10.63 |             |  | Employment Letter Agreement dated November 13, 2000,
	between the Company and David P. Wright (filed herewith).                                                                                                                                                              
|        | 10.64 |             |  | Employment Letter Agreement dated October 6, 2000, between
	the Company and Margaret M. Contessa (filed herewith).                                                                                                                                                           
|        | 11.01 |             |  | Statement re: Computation of Per Share Earnings (See Notes to
	Consolidated Financial Statements).                                                                                                                                                                           
|        | 13.01 |             |  | Portions of the Companys 2000 Annual Report to
	Stockholders (filed herewith).                                                                                                                                                                                              
|        | 21.01 |             |  | Subsidiaries of Registrant (incorporated by reference to
	Form 10-K for the year ended December 31, 1999).                                                                                                                                                                   
|        | 23.01 |             |  | Consent of KPMG LLP (filed herewith).                                                                                                                                                                                                                                        
|        | 24.01 |             |  | Power of Attorney (contained in signature page).                                                                                                                                                                                                                             




|  |                                                                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Unless otherwise noted above, all exhibits referenced above are
	incorporated by reference to the Registrants Annual Report
	on Form 10-K for the year ended December 31, 1997.



|  |                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------
| | Confidential treatment of certain portions of these agreements
	has been granted by the Securities and Exchange Commission.

(b)  Reports on 8-K:

(1)  On December 15, 2000, the Company filed a Current
Report on Form 8-K, the purpose of which was to file the
Placement Agent Letter Agreement engaging Ladenburg
Thalman & Co., Inc. as placement agent for the sale of
150,000 shares of the Companys common stock, registered on
Form S-3 (No. 333-50210).

51



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##### Table of Contents



Signatures and Power of Attorney

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.

March 29, 2001

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



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

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

KNOW ALL PERSONS BY THESE PRESENT, that each
person whose signature appears below constitutes and appoints,
Craig R. Smith, M.D., Andrew R. Jordan, Thomas C.
Seoh, Asher M. Rubin and Michael J. Silver, and each
of them, his or her true and lawful attorney-in-fact and agents,
with full power of substitution and resubstitution, from such
person and in each persons name, place and stead, in any
and all capacities, to sign the report and any and all
amendments to this report, and to file the same, with all
exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and any of them, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed by the
following persons in the capacities and on the date
indicated.

|                                                    |  |                                                                                                                            |  |               
|--------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                           |  | Title                                                                                                                      |  | Date          
|                                                    |  |                                                                                                                            |  |               
|/s/ CRAIG R. SMITHCraig R. Smith, M.D.              |  | Chief Executive Officer, President and Director (Principal
	Executive Officer)                                             |  | March 29, 2001
|/s/ ANDREW R. JORDANAndrew R. Jordan                |  | Sr. Vice President, Chief Financial Officer, and Treasurer
	(Principal Financial Officer and Principal Accounting Officer) |  | March 29, 2001
|/s/ SOLOMON H. SNYDERSolomon H. Snyder, M.D.        |  | Director                                                                                                                   |  | March 29, 2001
|/s/ RICHARD L. CASEYRichard L. Casey                |  | Director                                                                                                                   |  | March 29, 2001
|/s/ GEORGE L. BUNTING, JR.George L. Bunting, Jr.    |  | Director                                                                                                                   |  | March 29, 2001
|/s/ W. LEIGH THOMPSONW. Leigh Thompson, M.D., Ph.D. |  | Director                                                                                                                   |  | March 29, 2001
|/s/ ELIZABETH M. GREETHAMElizabeth M. Greetham      |  | Director                                                                                                                   |  | March 29, 2001
|/s/ JOSEPH KLEIN, IIIJoseph Klein, III              |  | Director                                                                                                                   |  | March 29, 2001
|/s/ RONALD M. NORDMANNRonald M. Nordmann            |  | Director                                                                                                                   |  | March 29, 2001

52