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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006.oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number:
    000-21291
    Introgen Therapeutics,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

74-2704230(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)301 Congress Avenue,
    Suite 1850 Austin, Texas

78701(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (512) 708-9310
 Securities registered pursuant to Section 12(b) of the
    Act:
 Common Stock, $0.001 par value per share
 Securities registered pursuant to Section 12(g) of the
    Act:
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K




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##### 



INTROGEN
    THERAPEUTICS, INC.
  ANNUAL
    REPORT ON
    FORM 10-K
  TABLE OF
    CONTENTS
  PART IItem 1.


Business


3Item 1A.


Risk
    Factors


28Item 1B.


Unresolved Staff
    Comments


43Item 2.


Properties


43Item 3.


Legal
    Proceedings


43Item 4.


Submission of
    Matters to a Vote of Security Holders


43PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


44Item 6.


Selected Financial
    Data


46Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


46Item 7A.


Quantitative and
    Qualitative Disclosures about Market Risk


63Item 8.


Financial
    Statements and Supplementary Data


65Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


65Item 9A.


Controls and
    Procedures


65Item 9B.


Other
    Information


65PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


66Item 11.


Executive
    Compensation


66Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


66Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


66Item 14.


Principal
    Accounting Fees and Services


66PART IVItem 15.


Exhibits and
    Financial Statement Schedules


66Signatures


71Patent and Technology License AgreementAmendment No. 5 to Patent and Technology License AgreementList of SubsidiariesConsent of Independent Registered Public Accounting FirmCertification of CEO and CFO Pursuant to Rule 13a-14(a) and Rule 15d-14(a)Certification of CEO and CFO Pursuant to Section 906   2




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PART I  Item 1.
    Business  This Annual Report on
    Form 10-K
    contains forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended
    (Securities Act) and Section 21E of the Securities Exchange
    Act of 1934, as amended (Exchange Act). These statements address
    our future operations, financial condition, business strategies
    and other prospective items as well as the statements below
    under Item 1A. Risk Factors, and include, among
    other subjects, matters concerning our expectations
    regarding:
  
    The growth of our operations, business and revenues and the
    growth rate of our costs and expenses;
    Future increases in our research and development, sales and
    marketing and general and administrative expenses;
    The sufficiency of our existing cash, cash equivalents,
    marketable securities and cash generated from operations;
    Our expectations regarding various regulatory applications,
    procedures and approvals relating to our product candidates,
    including but not limited to our expectations regarding the
    timing of such applications, procedures and approvals;
    Better efficacy of our product candidates through the use of
    biomarkers; and
    Application of our research and development expertise to other
    diseases that result from cellular dysfunction and uncontrolled
    cell growth.  The words believe, expect,
    anticipate and other similar expressions generally
    identify forward-looking statements. These forward-looking
    statements are based on our current expectations and entail
    various risks and uncertainties. Given these risks and
    uncertainties, readers are cautioned not to place undue reliance
    on such forward-looking statements. We undertake no obligation
    to revise or publicly release the results of any revision to
    these forward-looking statements. These forward-looking
    statements are subject to certain risks and uncertainties that
    could cause our actual results to differ materially from those
    reflected in the forward-looking statements. Factors that could
    cause or contribute to such differences include, but are not
    limited to, those discussed in this Annual Report on
    Form 10-K,
    and in particular, the risks discussed under the heading
    Risk Factors in Part I, Item 1A of this
    Annual Report on
    Form 10-K
    and those discussed in other documents we file with the
    Securities and Exchange Commission (SEC). Investors should
    carefully review the information contained in Item 1A.
    Risk Factors and elsewhere in, or incorporated by
    reference into, this Annual Report on
    Form 10-K.
  Access to
    Company Information
  Form 10-K, Form 10-Q, Form 8-K Form 10-K.
    Overview
   3




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in vivo
    ®
          (512) 708-9310.
  Background
  Targeted
    Therapeutics
   4




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Delivery
    Systems
      An
    Overview of Cancer
        Tumor
    Suppressors
  FUS-1
   5




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Current
    Treatment of Cancer
      and/or
  The
    Introgen Approach
     6




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The
    Introgen Strategy
    
    Develop and Commercialize ADVEXIN Therapy and INGN 241 for
    Multiple Cancer Indications.  We plan to continue
    our development programs to commercialize our ADVEXIN therapy,
    using the p53 tumor suppressor, and our INGN 241 product, using
    the mda-7 tumor suppressor, also know as interleukin 24
    (IL-24), in
    multiple cancer indications.
    Develop Our Portfolio of Targeted Molecular Therapies and
    Other Drug Products.  Utilizing our significant
    research, clinical, regulatory and manufacturing expertise, we
    are evaluating development of additional molecular therapies for
    various cancers, including:  
    INGN 225, a highly specific cancer immunotherapy;
    INGN 234, an oral rinse or mouthwash formulation containing the
    p53 tumor suppressor;
    INGN 401, using the
    FUS-1 tumor
    suppressor;
    INGN 402 and 403, using nanoparticle formulations for systemic
    delivery of the p53 and mda-7 tumor suppressors; and
    INGN 007, a replication-competent viral therapy.    
    Develop a Nanoparticle Systemic Administration
    Platform.  Early pre-clinical and clinical studies
    with these new nanoparticle drugs have demonstrated a good
    safety profile and promising anti-cancer activity. In addition
    to FUS-1, we
    incorporate the p53 tumor suppressor and the mda-7 tumor
    suppressor in these nanoparticle formulations.
    Develop the Topical Use of Tumor
    Suppressors.  We plan to continue developing
    topical product candidates for the treatment or prevention of
    oral and dermal cancers, specifically INGN 234 referred to
    above. We believe these treatments are a logical extension of
    our loco-regional delivery of cancer therapies and represent
    attractive product candidates since pre-malignant and malignant
    cells can be exposed to natural, biological tumor suppressors
    and DNA repairing agents.
    Establish Targeted Sales and Marketing
    Capabilities.  The oncology market can be
    effectively addressed by a small, focused sales force because it
    is characterized by a concentration of specialists in relatively
    few major cancer centers. We believe we can address this market
    by a combination of building a direct sales force as part of the
    ADVEXIN therapy commercialization process and pursuing marketing
    and distribution agreements with corporate partners for ADVEXIN
    therapy as well as additional products.
    Expand Our Market Focus to Non-Cancer
    Indications.  We plan to leverage our scientific,
    research and process competencies in molecular therapy and
    vector development to pursue targeted molecular therapies for a
    variety of other diseases and conditions. We believe these
    therapies could hold promise for diseases such as cardiovascular
    disease and rheumatoid arthritis, which, like cancer, result
    from cellular dysfunction or uncontrolled cell growth. 7




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ADVEXIN®
    Therapy (p53)
  ADVEXIN
    Therapy Overview and Regulatory Status
  ®
  10-year
           8




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and/or
        ADVEXIN
    Therapy as a Targeted Molecular Therapy
     9




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10




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10-year
      Other
    ADVEXIN Therapy Activities
  Cancer. follow-up 30-41 months),
  Clinical Cancer Research.
      
    A Phase 2 clinical trial of ADVEXIN therapy in squamous
    cell carcinoma of the oral cavity, or oropharynx, that can be
    removed surgically, to assess the feasibility, efficacy and
    safety of administering ADVEXIN therapy at the time of surgery
    for suppression of remaining tumor cells, followed by a
    combination of chemotherapy and radiation therapy.
    A Phase 1/early Phase 2 clinical trial in which a
    mouthwash or oral rinse formulation of ADVEXIN therapy, which
    has been designated as INGN 234, is administered to prevent
    precancerous oral lesions from developing into cancerous lesions.   11




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Clinical Cancer Research Proceedings of the American Society for Clinical
    Oncology
      Molecular
    Cancer Therapeutics.
  ® The Laryngoscope
  Conquest
  ® ® ® ®
    INGN
    241 (mda-7)
     12




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®
  ® ® ® Molecular Therapy
  ® ®
      in vivo
 13




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##### Table of Contents



® ® ® ® ® ®
      Journal of Leukocyte Biology Cancer Gene Therapy Cancer Research Molecular
    Therapy Oncogene Surgery International Immunopharmacolgy.
  ® ® ®
  INGN
    225 (p53 molecular immunotherapy)
  Current Opinion in
    Drug Discovery & Development
 14




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INGN
    234 (p53 topical)
      INGN
    401
    (FUS-1)
  FUS-1, FUS-1,
    Cancer Research.
  ®
 15




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Cancer Gene Therapy Cancer Research.
  INGN
    402 and INGN 403 (nanoparticle formulations of p53 and mda-7,
    respectively)
  DNA and Cell Biology
  INGN
    007 (oncolytic viral therapy)
  Cancer Research
  Other
    Research and Development Programs
    FUS-1
  Cancer Research Cancer Wise
   16




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Clinical Cancer Research Molecular Cancer Therapeutics.
    Introgen
    Enabling Technologies
    Nanoscale
    Viral Delivery Systems
    Nanoparticle
    Systemic Delivery Platform
        DNA and Cell Biology
  Replicating
    Viral Delivery Systems
   17




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self-amplifying
  Additional
    Enabling Technologies
    
    Multi-Molecule Vector System.  This technology
    is designed to combine multiple therapeutic molecules with a
    vector. This approach has the potential for use with both viral
    and non-viral delivery systems to allow the activity of more
    than one molecular therapy at a time for disease treatment.
    Pro-Apoptotic Molecule Delivery System.  This
    technology is designed to allow the activity of
    pro-apoptotic,
    or apoptosis-inducing, molecules during treatment only, while
    temporarily suppressing the ability of the apoptotic molecule to
    kill producer cells during production. This system could
    facilitate higher volume production of pro-apoptotic agents.
    Tissue-Specific Targeting Systems.  This
    technology is designed to promote the activity of the
    therapeutic molecule in only those cells which have been
    affected by the disease being targeted. It is intended to be
    applied to both viral and non-viral vectors.  Manufacturing
    and Process Development
  scale-up
  state-of-the-art
  Business
    and Collaborative Arrangements
  Alliance
    with Colgate-Palmolive Company
    FUS-1)
   18




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VirRx,
    Inc.
          SR
    Pharma plc
    Academic
    and Other Collaborations
    The
    University of Texas M. D. Anderson Cancer Center
   19




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and/or
  National
    Cancer Institute
    Research
    and License Agreement for the mda-7 Tumor
    Suppressor
  patent-by-patent product-by-product
  Moffitt
    Cancer Center
    London
    Stock Exchange
    Research
    and Development Expense
   20




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Marketing
    and Sales
    Patents
    and Intellectual Property
  Our
    Portfolio
      Adenoviral
    p53 Compositions and Therapies
      Combination
    Therapy with Tumor Suppressors, including p53 and
    mda-7/IL24
  and/or
  
    DNA-damaging agents and conventional chemotherapies;
    Immunotherapeutics (e.g.,
    Herceptin®); 21




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
    COX-2 inhibitors (e.g., celecoxib);
    Hsp90 inhibitors;
    Proteasome inhibitors;
    VEGF inhibitors (e.g.,
    Avastin®); and
    EGFr inhibitors (e.g.,
    Tarceva®,
    Iressa®).    ® ®
  Adenovirus
    Production, Purification and Formulation
      Other
    Tumor Suppressors
  (FUS-1)
  Other
    Therapeutic, Composition and Process Technologies
     22




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Benzimidazole
    Small Molecule Cancer Therapy Program
    Trade
    Secrets
        Government
    Regulation
  The
    Drug Approval Process
    
    Completion of preclinical laboratory and animal testing;
    Submission of an investigational new drug application, or IND,
    which must become effective before clinical trials may begin;
    Performance of adequate and well controlled human clinical
    trials to establish the safety and efficacy of the proposed drug
    or biologics intended use; and
    In the case of a new drug, approval by the FDA of a New Drug
    Application (NDA) or of a BLA for a biologic.
    A complex, lengthy, cumbersome and expensive process such that
    we cannot be certain that we will receive FDA approval for any
    of our products. 23




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Pre-Clinical
    Testing
    Clinical
    Trials
      National
    Institutes of Health
      Marketing
    Applications
   24




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Orphan
    Drug Act
      time-to-time
 25




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Off-Label
    Use
    New England Journal of Medicine
  Fast
    Track Products
        
    Priority Review.  Under FDA policies, a product
    is eligible for priority review, or review within a six-month
    time frame from the time an NDA or BLA is accepted for filing,
    if the product provides a significant improvement compared to
    marketed products in the treatment, diagnosis, or prevention of
    a disease. A Fast Track designated product would ordinarily meet
    the FDAs criteria for priority review. We cannot guarantee
    any of our products will receive a priority review designation,
    or if a priority designation is received, that review or
    approval will be faster than conventional FDA procedures.
    Accelerated Approval.  Under the FDAs
    Accelerated Approval regulations, the FDA is authorized to
    approve products that have been studied for their safety and
    effectiveness in treating serious or life-threatening illnesses
    and that provide meaningful therapeutic benefit to patients over
    existing treatments based upon either a surrogate endpoint that
    is reasonably likely to predict clinical benefit or on the basis
    of an effect on a clinical endpoint other than patient survival.
    In clinical trials, surrogate endpoints are alternative
    measurements of the symptoms of a disease or condition that are
    substituted for measurements of observable clinical symptoms.
    Accelerated Approval of an application will be subject to
    Phase 4 or post-approval studies to validate the surrogate
    endpoint or confirm the effect on the clinical endpoint. Failure
    to validate a surrogate endpoint or confirm a clinical benefit
    during post-marketing studies will allow the product to be
    withdrawn from the market by the FDA on an expedited basis. All
    promotional materials for drugs approved under accelerated
    regulations are subject to prior review by the FDA.   26




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International
        Competition
        ®
  and/or and/or
   27




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Human
    Resources
    Scientific
    Advisory Board
    Jack A. Roth, M.D., Chairman of the Scientific Advisory
    Board
  Carol L. Prives, Ph.D.
  Daniel D. Von Hoff, M.D., F.A.C.P.
  Elizabeth Grimm, Ph.D
  Item 1A.
    Risk
    Factors  If we
    are unable to commercialize
    ADVEXIN®
    therapy in various markets for multiple indications,
    particularly for the treatment of recurrent head and neck
    cancer, our business will be harmed.   28




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If we
    fail to comply with FDA or foreign regulatory authority
    requirements or encounter delays or difficulties in clinical
    trials for our product candidates, we may not obtain regulatory
    approval of some or all of our product candidates on a timely
    basis, if at all.      pre-clinical
    
    the product candidate is less effective
    and/or more
    toxic than current therapies;
    the presence of unforeseen adverse side effects of a product
    candidate, including its delivery system;
    a longer than expected time required to determine whether or not
    a product candidate is effective;
    the death of patients during a clinical trial, even if the
    product candidate did not cause those deaths;
    the failure to enroll a sufficient number of patients in our
    clinical trials;
    the inability to produce sufficient quantities of a product
    candidate to complete the trials; or
    the inability to commit the necessary resources to fund the
    clinical trials.     29




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post-marketing
  Even
    if our products are approved by regulatory authorities, if we
    fail to comply with ongoing regulatory requirements, or if we
    experience unanticipated problems with our products, these
    products could be subject to restrictions or withdrawal from the
    market.    Failure
    to comply with foreign regulatory requirements governing human
    clinical trials and marketing approval for drugs could prevent
    us from selling our products in foreign markets, which may
    adversely affect our operating results and financial
    conditions.    We
    have a history of operating losses, expect to incur significant
    additional operating losses and may never become
    profitable.     30




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If we
    continue to incur operating losses for a period longer than we
    anticipate and fail to obtain the capital necessary to fund our
    operations, we will be unable to advance our development program
    and complete our clinical trials.      
    an acceleration of the number, size or complexity of our
    clinical trials;
    slower than expected progress in developing ADVEXIN therapy,
    INGN 241 or other product candidates;
    higher than expected costs to obtain regulatory approvals;
    higher than expected costs to pursue our intellectual property
    strategy;
    higher than expected costs to further develop and scale up our
    manufacturing capability;
    higher than expected costs to develop our sales and marketing
    capability;
    faster than expected rate of progress and cost of our research
    and development and clinical trial activities;
    a decrease in the amount and timing of milestone payments we
    receive from collaborators;
    higher than expected costs of preparing an application for FDA
    or foreign regulatory approval of ADVEXIN therapy;
    higher than expected costs of developing the processes and
    systems to support FDA or foreign regulatory approval of ADVEXIN
    therapy;
    an increase in our timetable and costs for the development of
    marketing operations and other activities related to the
    commercialization of ADVEXIN therapy and our other product
    candidates;
    a change in the degree of success in our Phase 3 clinical
    trial of ADVEXIN therapy and in the clinical trials of our other
    products;
    the emergence of competing technologies and other adverse market
    developments; or
    changes in or terminations of our existing collaboration and
    licensing arrangements.    If we
    cannot maintain our existing corporate and academic arrangements
    and enter into new arrangements, we may be unable to develop
    products effectively, or at all.   31




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and/or
  If we
    do not continue to receive grant funding from federal agencies
    and others, we may be unable to continue our research and
    development programs for certain of our product candidates at
    current levels or in the manner we have planned for the
    future.    If we
    are not able to create effective collaborative marketing
    relationships, we may be unable to market ADVEXIN therapy
    successfully or in a cost-effective manner.    Serious
    and unexpected side effects attributable to molecular therapies
    may result in governmental authorities imposing additional
    regulatory requirements or a negative public perception of our
    products.     32




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Patient
    enrollment may be slow and patients may discontinue their
    participation in clinical studies, which may negatively impact
    the results of these studies, and extend the timeline for
    completion of our and our collaborators development
    programs for our product candidates.    
    the size of the patient population;
    the nature of the clinical protocol requirements;
    the diversion of patients to other trials or marketed therapies;
    the ability to recruit and manage clinical centers and
    associated trials;
    the proximity of patients to clinical sites; and
    the patient eligibility criteria for the study.    We
    cannot predict the safety profile of the use of ADVEXIN therapy
    when used in combination with other therapies.    If we
    fail to adequately protect our intellectual property rights, our
    competitors may be able to take advantage of our research and
    development efforts to develop competing drugs.   33




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and/or
   34




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Third-party
    claims of infringement of intellectual property could require us
    to spend time and money to address the claims and could limit
    our intellectual property rights.         35




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We may
    be subject to litigation and infringement claims that may be
    costly, divert managements attention, and materially harm
    our business.      If we
    fail to meet our obligations under license agreements, we may
    lose our rights to key technologies on which our business
    depends.    Competition
    and technological change may make our product candidates and
    technologies less attractive or obsolete.  and/or and/or
 36




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Even
    if we receive regulatory approval to market our ADVEXIN therapy,
    INGN 241, INGN 225 or other product candidates, we may not be
    able to commercialize them profitably.    
    they are more effective than alternative treatments;
    their side effects are acceptable to patients and doctors;
    insurers and other third-party healthcare payers will provide
    adequate reimbursement for them;
    we produce and sell them at a profit; and
    we market ADVEXIN therapy, INGN 241, INGN 225 and other product
    candidates effectively.  We
    must achieve significant market share and obtain high
    per-patient prices for our products to achieve
    profitability.    If we
    are unable to manufacture our products in sufficient quantities
    or obtain regulatory approvals for our manufacturing facilities,
    or if our manufacturing process is found to infringe a valid
    patented process or processes of another company, then we may be
    unable to meet demand for our products and lose potential
    revenue.  third-party
 37




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scale-up, scale-up
    We
    rely on a limited number of suppliers for some of our
    manufacturing materials. Any problems experienced by such
    suppliers could negatively affect our operations.    If
    product liability lawsuits are successfully brought against us,
    we may incur substantial damages and demand for our product
    candidates may be reduced.    
    decreased demand for our product candidates;
    injury to our reputation and significant media attention;
    withdrawal of clinical trial volunteers; 38




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
    substantial delay in FDA or foreign regulatory authority
    approval;
    costs of litigation; and
    substantial monetary awards to plaintiffs.    We use
    hazardous materials in our business, and any claims relating to
    improper handling, storage or disposal of these materials could
    harm our business.    Our
    stock price may fluctuate substantially.    
    progress and results of our pre-clinical and clinical trials;
    announcement of technological innovations by us or our
    competitors;
    developments concerning proprietary rights, including patent and
    litigation matters;
    publicity regarding actual or potential results with respect to
    products under development by us or by our competitors;
    regulatory developments;
    the announcement of new products by us or our competitors;
    quarterly variations in our or our competitors results of
    operations;
    failure to achieve operating results projected by securities
    analysts;
    changes in earnings estimates or recommendations by securities
    analysts;
    developments in our industry; and
    general market conditions and other factors.    If we
    do not progress in our programs as anticipated, our stock price
    could decrease.  Form 10-K
 39




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Any
    acquisition we might make may be costly and difficult to
    integrate, may divert management resources or dilute stockholder
    value.    
    potential exposure to unknown liabilities of acquired companies;
    the difficulty and expense of assimilating the operations and
    personnel of acquired businesses;
    diversion of management time and attention and other resources;
    loss of key employees and customers as a result of changes in
    management;
    the incurrence of amortization expense; and
    possible dilution to our stockholders.    Due to
    the potential value of our strategic investments, we could be
    determined to be an investment company, and if such a
    determination were made, we would become subject to significant
    regulation that would adversely affect our
    business.    Rule 3a-2
 40




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If we
    lose key personnel or are unable to attract and retain
    additional, highly skilled personnel required to develop our
    products or obtain new collaborations, our business will
    suffer.    Future
    changes in financial accounting standards or practices or
    existing taxation rules or practices may cause adverse
    unexpected financial reporting fluctuations and affect our
    reported results of operations.    Our
    corporate governance structure, including provisions in our
    certificate of incorporation and by-laws, and Delaware law, may
    prevent a change in control or management that stockholders may
    consider desirable.   41




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Some
    of our insiders are parties to transactions with us that may
    cause conflicting obligations.        page F-7 Form 10-K
   42




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties          Item 3.
    Legal
    Proceedings      Item 4.
    Submission
    of Matters to a Vote of Security Holders  Form 10-K.
 43




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    and Equityholder Information
    High


LowFiscal Year Ended
    December 31, 2005:First Fiscal Quarter

$
8.60


$
6.35Second Fiscal Quarter


8.10



6.07Third Fiscal Quarter


7.40



4.90Fourth Fiscal Quarter


6.60



4.54Fiscal Year Ended
    December 31, 2006:First Fiscal Quarter

$
6.45


$
4.91Second Fiscal Quarter


5.62



3.50Third Fiscal Quarter


4.88



3.78Fourth Fiscal Quarter


5.20



4.28     Dividend
    Policy
    Stock
    Repurchases
  Form 10-K.
  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
  Form 10-K.
 44




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Stock
    Price Performance Graph
  COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN* Among
    Introgen Therapeutics, Inc., The NASDAQ Composite Index
    And The S & P Biotechnology Index
  
     ©
 45




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Item 6.
    Selected
    Financial Data  Form 10-K. Forms 10-K
  Year Ended December 31,2002


2003


2004


2005


2006Statement of Operations
    Data:Contract services, grants and
    other revenue

$
1,173


$
304


$
1,808


$
1,867


$
1,151Collaborative research and
    development revenue from affiliate


















Product sales to affiliate


















Cost of product sales


















Gross margin on product sales


















Operating costs and expense:Research and development


21,512



14,973



20,474



21,400



18,221General and administrative


6,722



6,102



6,597



7,834



13,163Total operating costs and expense


28,234



21,075



27,071



29,234



31,384Loss from operations


(27,061
)


(20,771
)


(25,263
)


(27,367
)


(30,233
)Interest income (expense), net


(207
)


393



(191
)


166



343Other income


1,140



1,052



1,067



1,098



1,089Net loss

$
(26,128
)

$
(19,326
)

$
(24,387
)

$
(26,103
)

$
(28,801
)Net loss per share, basic and
    diluted

$
(1.22
)

$
(0.84
)

$
(0.91
)

$
(0.80
)

$
(0.77
)Shares used in computing basic and
    diluted net loss per share


21,471



22,902



26,943



32,780



37,594   December 31,2002


2003


2004


2005


2006Balance Sheet Data:Cash, cash equivalents, and
    short-term investments

$
23,467


$
36,397


$
38,180


$
33,122


$
41,345Working capital


18,852



31,091



31,981



29,529



39,957Total assets


33,316



44,483



48,057



42,981



54,161Notes payable, net of current
    portion


7,435



6,714



7,901



7,784



7,448Deferred revenue and other,
    long-term


619



876



1,132



1,404



923Accumulated deficit


(73,643
)


(92,969
)


(117,356
)


(143,459
)


(172,260
)Stockholders equity


19,835



31,285



32,166



27,011



37,048   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis should be read in
    conjunction with our Condensed Consolidated Financial Statements
    and the related notes thereto included in this Annual Report on
    Form 10-K.
    The discussion and analysis contains forward-looking statements
    within the meaning of Section 27A of the Securities Act and
    Section 21E of the Exchange Act. These statements include
    the statements under Item 1A. Risk Factors.
    These forward-looking statements are based on our current
    expectations and entail various risks and uncertainties. Our
 46




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##### Table of Contents



actual results could differ materially from those projected
    in the forward-looking statements as a result of various
    factors, including those set forth under Item 1A.
    Risk Factors.
  Overview
        Year Ended December 31,2004


2005


2006Operating activities

$
21,513


$
21,748


$
19,208Purchases of property and equipment


1,097



509



185Principal payments on notes payable


593



707



901     Year Ended December 31,2004


2005


2006Sales of our common stock

$
22,894


$
19,585


$
27,702Proceeds from notes payable


1,448



772



727Proceeds from stock option
    exercises


644



615



65     time-to-time
     47




---



##### Table of Contents



Colgate-Palmolive
    Form S-3, No. 333-107799),
  Form S-3 No. 333-140424),
  Mortgage
    Note Payable
      Magnum
    Therapeutics Corporation
         48




---



##### Table of Contents



Cash and cash equivalents

$
9Acquired grant rights

$
1,711     Conversion
    of Preferred Stock to Common Stock
      Form S-3 (File No. 333-129687)
    Stock
    Options
  time-to-time,
  
    Options issued to members of our Board of Directors vest monthly
    over 12 months.
    Options issued to our Chief Executive Officer vest 100% on the
    date of grant.
    Options issued to all other persons cliff vest at the rate of
    25% per year over four years.    Stock
    Purchase Warrants
  time-to-time,
   49




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##### Table of Contents



Investment
    in SR Pharma plc
    London
    Stock Exchange
    Research
    Grants
        Critical
    Accounting Policies
  Use of Estimates.
  Cash, Cash Equivalents and Short-term
    Investments. held-to-maturity
  Marketable Securities. available-for-sale.
 50




---



##### Table of Contents



Intangible Assets.
  Revenue Recognition. and/or
  Research and Development Costs.
    Share-Based Compensation.
       51




---



##### Table of Contents



Recently
    Issued Accounting Pronouncements
    Results
    of Operations
  project-by-project
        
    If we are unable to commercialize
    ADVEXIN®
    therapy in various markets for multiple indications,
    particularly for the treatment of recurrent head and neck
    cancer, our business will be harmed;
    If we fail to comply with FDA or foreign regulatory
    authority requirements or encounter delays or difficulties in
    clinical trials for our product candidates, we may not obtain
    regulatory approval of some or all of our product candidates on
    a timely basis, if at all;
    Even if our products are approved by regulatory
    authorities, if we fail to comply with ongoing regulatory
    requirements, or if we experience unanticipated problems with
    our products, these products could be subject to restrictions or
    withdrawal from the market; 52




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##### Table of Contents




    Failure to comply with foreign regulatory requirements
    governing human clinical trials and marketing approval for drugs
    could prevent us from selling our products in foreign markets,
    which may adversely affect our operating results and financial
    conditions;
    If we continue to incur operating losses for a period
    longer than we anticipate and fail to obtain the capital
    necessary to fund our operations, we will be unable to advance
    our development program and complete our clinical
    trials;
    If we cannot maintain our existing corporate and
    academic arrangements and enter into new arrangements, we may be
    unable to develop products effectively, or at all;
    If we are not able to create effective collaborative
    marketing relationships, we may be unable to market ADVEXIN
    therapy successfully or in a cost-effective manner; and
    Even if we receive regulatory approval to market our
    ADVEXIN therapy, INGN 241, INGN 225 or other product candidates,
    we may not be able to commercialize them profitably.  Comparison
    of Years Ended December 31, 2006, 2005 and 2004
    Contract
    Services, Grant and Other Revenue
  2004


2005


2006Contract services, grant and other
    revenue

$
1,808


$
1,867


$
1,151Percent increase (decrease) from
    previous period


N/A



3
%


(38
)%       
    Decreased revenue earned under research grants from
    U.S. Government agencies as a result of us substantially
    completing, subsequent to the 2005 period, work to be performed
    under the grant held by Magnum;    
    Increased contract services revenue as a result of the
    completion of certain contract services which allowed us to
    recognize revenue for those services that had been deferred in
    previous periods.    
    Increased contract services revenue from third parties under
    agreements to provide manufacturing process development and
    product production services for them due to increased emphasis
    on our part in performing such work; 53




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##### Table of Contents




    Decreased revenue earned from research grants from
    U.S. Government agencies due to (1) completion of work
    under certain grants during the 2005 period such that funding
    under those grants was received for only a portion of that
    period as compared to being received for the entire 2004 period
    and (2) normal variations in the timing of work performed
    under grants for which work was ongoing.  Research
    and Development Expense
  2004


2005


2006Pre-clinical stage programs expense

$
2,632


$
2,644


$
1,349Clinical stage programs expense


14,822



15,713



13,462General research and development
    expense


3,020



3,043



3,410Total research and development
    expense

$
20,474


$
21,400


$
18,221Percent increase (decrease) in
    total from previous period


N/A



5
%


(15
)%       
    Lower costs in the 2006 period compared to the 2005 period since
    the 2005 period included higher costs related to our pursuit of
    an initial rolling BLA filing strategy for ADVEXIN therapy;
    Decreased expense related to the amortization of grant rights
    acquired in the purchase of Magnum as a result of the completion
    of our work and related funding under that grant in the 2006
    period;
    Decreased costs of manufacturing supplies of clinical materials
    as our manufacturing activities in earlier periods provided us
    with adequate quantities of clinical materials to conduct our
    clinical trials for the foreseeable future such that we were
    able to reduce such manufacturing activities in the 2006
    period; and
    The expiration of the requirement to purchase additional shares
    of VirRx, discussed in Note 11 to our Consolidated
    Financial Statements under License and Research
    Agreements  VirRx, Inc.;    
    Higher share-based compensation expense, which increased for the
    reasons discussed below under Share-Based Compensation
    Expense.    
    Increased amortization related to the amortization of grant
    rights acquired in the purchase of Magnum;
    Increased share-based compensation expense for the reasons
    discussed below under Share-Based Compensation
    Expense;
    Increased manufacturing and process development costs resulting
    from ongoing development of production processes for our product
    candidates; and
    Increased manufacturing process development and product
    production services for third parties;    
    Decreased costs related to the preparation of the BLA for
    ADVEXIN therapy for filing with the FDA since, even though that
    work was ongoing during 2005, significant portions of that
    initial work were completed in 2004. 54




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##### Table of Contents



General
    and Administrative Expense
  2004


2005


2006General and administrative expense

$
6,597


$
7,834


$
13,163Percent increase (decrease) from
    previous period


N/A



19
%


68
%         
    Higher share-based compensation expense, which increased for the
    reasons discussed below under Share-Based Compensation
    Expense; and
    Increased consulting and professional fees related to the
    pursuit of foreign capital;    
    Decreased costs related to securities offerings not pursued to
    completion in the 2004 period for which such activities were not
    repeated in the 2005 period.  Share-Based
    Compensation Expense
  2004


2005


2006Share-based compensation expense

$
253


$
1,332


$
7,041Percent increase (decrease) from
    previous period


N/A



426
%


429
%   s
  s
     55




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##### Table of Contents



Interest
    Income
  2004


2005


2006Interest income

$
309


$
787


$
1,032Percent increase (decrease) from
    previous period


N/A



155
%


31
%     
    Higher interest rates earned on our invested funds in the 2006
    period compared to the 2005 period;    
    A lower overall average balance of cash, cash equivalents and
    short-term investments in the 2006 period compared to the 2005
    period.    
    Higher interest rates earned on our invested funds in the 2005
    period compared to the 2004 period; and
    A higher overall average balance of cash, cash equivalents and
    short-term investments in the 2005 period compared to the 2004
    period.  Interest
    Expense
  2004


2005


2006Interest expense

$
(500
)

$
(621
)

$
(689
)Percent increase (decrease) from
    previous period


N/A



24
%


11
%     
    Ongoing, additional borrowings to finance equipment acquisitions
    and higher interest rates on those additional
    borrowings; and
    An increased interest rate on our mortgage note payable as a
    result of the refinancing of that note payable during the 2004
    period and the exercise during the 2006 period of our option to
    extend that note payable.  Other
    Income
  2004


2005


2006Other income

$
1,067


$
1,098


$
1,089Percent increase (decrease) from
    previous period


N/A



3
%


(1
)%     Liquidity
    and Capital Resources
     56




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##### Table of Contents




    $69.1 million of equity sales in December 2003, December
    2004, November 2006 and December 2006 through registered direct
    offerings under a shelf registration filed with the SEC;
    $49.7 million of collaborative research and development
    payments from Aventis;
    $39.4 million of private equity sales to Aventis;
    $32.2 million from our initial public offering in October
    2000;
    $29.4 million of private equity sales various other parties;
    $22.4 million from contract services, grants, interest and
    other income;
    $19.6 million of equity sales to Colgate-Palmolive under a
    shelf registration filed with the SEC and pursuant to an
    alliance agreement entered into in November 2005;
    $9.9 million in mortgage financing from banks for our
    facilities;
    $7.5 million of sales of ADVEXIN therapy product to Aventis
    for use in later-stage clinical trials; and
    $6.2 million in leases and notes payable from commercial
    lessors and lenders to acquire equipment pledged as collateral
    for those leases and notes.      2004


2005


2006Used in operating activities

$
21,513


$
21,748


$
19,208Used by investing activities

$
9,090


$
589


$
10,920Provided by financing activities

$
24,393


$
20,265


$
27,593        57




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##### Table of Contents



Net
    Cash Used in Operating Activities
  2004

2005

2006Net cash used in operating
    activities

$
21,513


$
21,748


$
19,208     
    Net loss  The net loss reported in our
    statement of operations includes certain expenses that do not
    involve the use of cash. The following table illustrates the
    portion of our net loss for which we use cash:  2004


2005


2006Net loss

$
(24,387
)

$
(26,103
)

$
(28,801
)Less expenses not requiring the
    use of cash:Depreciation


1,322



1,605



1,388Share-based compensation


253



922



7,013Amortization of grant rights
    acquired


159



1,419



133Portion of net loss for which we
    use cash

$
(22,653
)

$
(22,157
)

$
(20,267
)Percent increase (decrease) from
    previous period


N/A



(2
)%


(9
)%     
    Accounts payable and accrued liabilities 
    Changes in these accounts arise primarily from variations in the
    timing of payments to vendors and employees that arise in the
    ordinary course of business. This timing is a function of:  
    Variations in our general business activities;
    The nature of vendors to whom we have obligations;
    The nature of payment terms we receive from vendors;
    The timing of when we elect to make payments to vendors based on
    our available cash balances and cash flow needs; and
    The timing of our regularly scheduled paydays for our employees
    relative to the end of our accounting periods.    
    Deferred revenue and other  These accounts
    relate to:
    Cash payments for contract manufacturing, process development
    and product production services work received in advance of
    completing the work to which the payments relate, which
    increased our deferred revenue. This deferred revenue decreases,
    with no effect on cash, as we complete the work and recognize
    the related revenue;
    Rental income we receive from the sublease of laboratory space
    to third parties under leases that have variable monthly rent
    amounts over the term of the lease. We recognize this income on
    a straight-line basis over the term of the lease. Any cash
    payments received in excess of rental income recognized is
    recorded as deferred revenue. This deferred revenue decreases,
    with no effect on cash, when the cash payments we receive are
    less than the rental income recognized on a straight-line
    basis; and 58




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##### Table of Contents




    The long-term portion of fees payable to a placement agent that
    assisted with our sale of common stock in November 2006 and
    December 2006.    
    A scheduled decrease during the 2006 period in the amount of the
    monthly rent payments we received under a sublease of a portion
    of our facilities to M. D. Anderson Cancer Center, resulting in
    the monthly rent payments we received during the 2006 period
    being less than the monthly revenue we recognized on a
    straight-line basis, which caused deferred revenue to decrease
    during the 2006 period; and
    Completion of certain contract services during the 2006 period
    for which revenue recognition had been previously deferred,
    which allowed us to recognize revenue for those services thereby
    causing a decrease in deferred revenue;    
    An increase in other liabilities arising from the long-term
    portion of fees payable to a placement agent that assisted with
    our sale of common stock in November 2006 and December 2006.    
    Other assets  Other assets increased during
    the 2006 period, decreased in the 2005 period and increased in
    the 2004 period. Changes in other assets vary in direction and
    amount based on the timing of and dollars involved in
    transactions related to items such as prepaid expenses, grant
    funding receivable and deposits. The aggregate changes in
    prepaid assets during the 2006, 2005 and 2004 periods resulted
    from such activities that arose during the normal course of our
    business, with no component of those aggregate changes being
    material to our business as a whole.      Net
    Cash Used In Investing Activities
  2004

2005

2006Net cash used in investing
    activities

$
9,090


$
589


$
10,920     
    A higher level of net activity in purchases of short-term
    investments in the 2006 period compared to the 2005 period
    arising from (1) normal variations in the amount and timing
    of purchases and sales of short-term investments based on our
    operating needs for cash and cash equivalents and (2) the
    availability of cash from sales of our common stock, with those
    activities offset by; 59




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##### Table of Contents




    A lower level of equipment purchases to support our business
    being necessary in the 2006 period compared to the 2005 period
    since our facilities were substantially fully outfitted in
    previous periods.    
    A lower level of net activity in purchases of short-term
    investments in the 2005 period compared to the 2004 period due
    to (1) normal variations in the amount and timing of
    purchases and sales of short-term investments based on our
    operating needs for cash and cash equivalents and (2) the
    availability of cash from sales of our common stock, and;
    A lower level of equipment purchases to support our business
    being necessary in the 2005 period compared to the 2004 period.    Net
    Cash Provided by Financing Activities
  2004

2005

2006Cash provided by financing
    activities

$
24,393


$
20,265


$
27,593     
    An increase in proceeds from sales of common stock due to our
    success in selling more shares of our common stock to raise
    capital in the 2006 period compared to the 2005 period;    
    A decrease in proceeds from exercise of options for common stock
    in the 2006 period compared to the 2005 period, which is
    activity that can vary based upon the actions of the individuals
    holding such options; and
    An increase in principal payments under notes payable in the
    2006 period compared to the 2005 period due to additional
    borrowings during and subsequent to the 2005 period to finance
    equipment purchased during that period.    
    A decrease in proceeds from sales of common stock to third
    parties and a lower level of stock option exercises in the 2005
    period compared to the 2004 period;
    A decrease in proceeds from notes payable in the 2005 period
    compared to the 2004 period as the 2004 period included proceeds
    received from an amendment of a mortgage note in that period,
    which is an event that did not occur again in the 2005
    period; and
    An increase in principal payments under notes payable and
    capital leases in the 2005 period compared to the 2004 period
    due to additional borrowings during and subsequent to the 2004
    period to finance equipment acquisitions. 60




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##### Table of Contents



Debt
    Service, Lease and Other Obligations
    Total debt service payments due
    during the year ending December 31:2007

$
1,5262008


1,0282009


8242010


7352011


734Thereafter


9,651Total debt service payments


14,498Less portion representing interest


(6,133
)Total principal balance at
    December 31, 2006

$
8,365Principal balance presented on
    the December 31, 2006 balance sheet as liabilities in these
    categories:Current portion of notes payable

$
917Notes payable, net of current
    portion


7,448Total principal balance at
    December 31, 2006

$
8,365     
    A ground lease for the land on which we built our primary
    research and manufacturing facilities with annual rent payments
    of $156,000 through September 2026. These payments are subject
    to adjustment in the future for inflation.
    A lease for a building housing our second production facility
    with annual rent payments of $97,000 through January 2009.
    A lease for our corporate office space with annual rent payments
    of $230,000 through July 2009.      Year ending December 31, 2007

$
5082008


4922009


3022010


1562011


156Thereafter


2,303Total minimum lease payments under
    operating leases

$
3,917    61




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##### Table of Contents



VirRx,
    Inc.
    
    We have purchased VirRxs Series A Preferred Stock for
    cash in the amount of $2,475,000 during the period from
    inception of this agreement through December 31, 2006, and
    in the amount of $150,000 in the 2006 period (specifically
    during the three months ended March 31, 2006) and
    $600,000 in the 2005 and 2004 periods. These purchases are
    recorded as research and development expense. We have no plans
    at this time to purchase additional shares of this stock and are
    no longer required to make periodic purchases of Series A
    Preferred Stock under this agreement. We may be required to make
    additional stock purchases in the event VirRx reaches certain
    specified milestones as described below.
    VirRx is required to use the proceeds from these stock sales in
    accordance with the terms of a collaboration and license
    agreement between VirRx and us for the development of
    VirRxs technologies. We may unilaterally terminate this
    collaboration and license agreement with 90 days prior
    notice.   62




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##### Table of Contents



Quarterly
    Results of Operations
    Three Months EndedMarch 31,


June 30,


September 30,


December 31,


March 31,


June 30,


September 30,


December 31,2005


2005


2005


2005


2006


2006


2006


2006(Unaudited)(In thousands, except per share amounts)Statement of Operations
    Data:Contract services, grant and other
    revenue

$
509


$
336


$
398


$
624


$
225


$
98


$
733


$
95Operating expense:Research and development


5,239



5,700



5,090



5,371



5,046



4,896



4,256



4,023General and administrative


1,810



2,006



1,657



2,361



3,796



3,273



2,546



3,548Loss from operations


(6,540
)


(7,370
)


(6,349
)


(7,108
)


(8,617
)


(8,071
)


(6,069
)


(7,476
)Interest income (expense), net


34



35



8



89



143



92



50



58Other income


275



274



277



272



255



288



281



265Net loss

$
(6,231
)

$
(7,061
)

$
(6,064
)

$
(6,747
)

$
(8,219
)

$
(7,691
)

$
(5,738
)

$
(7,153
)Basic and diluted net loss per share

$
(0.20
)

$
(0.23
)

$
(0.18
)

$
(0.19
)

$
(0.22
)

$
(0.21
)

$
(0.15
)

$
(0.19
)Shares used in computing basic and
    diluted net loss per share


30,741



31,182



33,394



35,742



37,180



37,214



37,245



38,723   Contractual
    Obligations
    One Year


Two to


Four to


More ThanTotal


or Less


Three Years


Five Years


Five YearsLong-term debt

$
14,498


$
1,526


$
1,852


$
1,469


$
9,651Operating leases


3,917



508



794



312



2,303Employment agreements


346



346











Consulting agreements


664



305



359







Total

$
19,425


$
2,685


$
3,005


$
1,781


$
11,954   Off-Balance
    Sheet Arrangements
  Regulation S-K.
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk   63




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##### Table of Contents



Interest
    Rate Risk
  held-to-maturity
      Equity
    Price Risk and Foreign Currency Exchange Rate Risk
  available-for-sale.
    
    A hypothetical 10% decrease in the stock price of our marketable
    securities as of December 31, 2006 would decrease the value
    of those marketable securities by approximately $696,000,
    compared to a decrease in the fair value of those marketable
    securities of approximately $290,000 as of December 31,
    2005;
    A hypothetical 10% decrease in the value of the British Pound as
    of December 31, 2006 would decrease the fair value of our
    marketable securities by approximately $696,000, compared to a
    decrease in the fair value of our marketable securities of
    approximately $290,000 as of December 31, 2005; and
    A hypothetical 10% decrease in the stock price of our marketable
    securities and a hypothetical 10% decrease in the value of the
    British Pound, in each case as of December 31, 2006, would
    decrease the fair value of our marketable securities by
    approximately $1.3 million, compared to a decrease in the
    fair value of our marketable securities of approximately
    $550,000 as of December 31, 2005.   64




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  page F-3 Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation of Disclosure Controls and
    Procedures. Form 10-K.
  Changes in Internal Control over Financial
    Reporting. Form 10-K
  Managements Annual Report on Internal Control over
    Financial Reporting.
    page F-1 Form 10-K.
  Item 9B.
    Other
    Information   65




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##### Table of Contents



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 and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  1.
    Consolidated
    Financial Statements  Form 10-K:
  PageReport of
    Independent Registered Public Accounting Firm


F-1Report of
    Independent Registered Public Accounting Firm


F-2Consolidated
    Balance Sheets


F-3Consolidated
    Statements of Operations


F-4Consolidated
    Statements of Stockholders Equity


F-5Consolidated
    Statements of Cash Flows


F-6Notes to
    Consolidated Financial Statements


F-7   2.
    Financial
    Statement Schedules   66




---



##### Table of Contents



3.
    Exhibits  (a) Exhibits
  ExhibitNumber



Description of Document3
.1(a)(6)



Certificate of Incorporation as
    currently in effect3
.1(b)(6)



Amendment to Certificate of
    Incorporation, effective as of December 21, 20013
.1(c)(10)



Amendment to Certificate of
    Incorporation, effective as of August 6, 20043
.2(4)



Bylaws of Introgen Therapeutics,
    Inc. (Introgen) as currently in effect4
.1(2)



Specimen Common Stock Certificate4
.2(5)



Certificate of Designations of
    Series A Non-Voting Convertible Preferred Stock4
.3(8)



Form of Stock Purchase Warrant4
.4(13)



Form of Stock Purchase Warrant10
.1(1)



Form of Indemnification Agreement
    between Introgen and each directors and officers10
.2(1)*



1995 Stock Plan and form of stock
    option agreement thereunder10
.3(3)*



2000 Stock Option Plan and forms
    of stock option agreement thereunder10
.3(11)*



2000 Stock Option Plan form of
    stock option agreement, as amended10
.4(3)*



2000 Employee Stock Purchase Plan
    and forms of agreements thereunder10
.5



Reserved10
.6



Reserved10
.7(a)(1)



Assignment of Leases, dated
    November 23, 1998, by TMX Realty Corporation and Riverway
    Bank, and other related agreements10
.7(b)(1)



Lease Agreement, dated
    June 7, 1996, by and between Introgen and Plaza del Oro
    Business Center10
.7(c)(2)



Amendment No. 1 to Lease
    Agreement, effective as of May 9, 199710
.7(d)(2)



Amendment No. 2 to Lease
    Agreement, effective as of July 31, 199810
.7(e)(2)



Amendment No. 3 to Lease
    Agreement, effective as of June 29, 200010
.7(f)(10)



Modification Agreement effective
    April 1, 2004 by TMX Realty Corporation and Texas State
    Bank (formerly known as Riverway Bank), and other related
    agreements10
.8(a)(1)



Patent and Technology License
    Agreement, effective as of July 20, 1994, by and between
    The Board of Regents of The University of Texas System, M. D.
    Anderson Cancer Center and Introgen10
.8(b)(1)



Amendment No. 1 to Patent
    License Agreement, effective as of September 1, 199610
.9(3)



Sponsored Research Agreement for
    Clinical Trial, No. CS
    93-27, dated
    February 11, 1993, between Introgen and M. D. Anderson, as
    amended10
.10



Reserved10
.11(3)



Sponsored Research Agreement
    No. SR
    93-04, dated
    February 11, 1993 between M. D. Anderson and Introgen, as
    amended10
.12



Reserved10
.13(3)



Sponsored Research Agreement
    No. SR
    96-004
    between Introgen and M. D. Anderson, dated January 17, 199610
.14



Reserved10
.15(3)



License Agreement, dated
    March 29, 1996 between Introgen and SKCC10
.16(1)



Consulting Agreement between
    Introgen and Jack A. Roth, M.D., effective as of
    October 1, 199410
.17(1)



Consulting Agreement between EJ
    Financial Enterprises, Inc. and Introgen, effective as of
    July 1, 199410
.18(d)(12)*



Employment Agreement dated as of
    August 1, 2003 between Introgen and David G. Nance10
.19



Reserved10
.20(a)(1)



Collaboration Agreement (p53
    Products), effective as of October 7, 1994, between
    Introgen and RPR, as amended10
.20(b)(3)



Addendum No. 1 to
    Collaboration Agreement (p53 Products), dated January 23,
    1996, between Introgen and RPR10
.20(c)(1)



1997 Agreement Memorandum,
    effective as of July 22, 1997, between Introgen and RPR 67




---



##### Table of Contents



ExhibitNumber



Description of Document10
.20(d)(3)



Letter Agreement, dated
    April 19, 1999, from Introgen to RPR regarding
    manufacturing process for ADVEXIN therapy10
.21(a)(1)



Collaboration Agreement (K-ras
    Products), effective as of October 7, 1994, between
    Introgen and RPR, as amended10
.21(b)(1)



Amendment No. 1 to
    Collaboration Agreement (K-ras Products), effective as of
    September 27, 1995, between Introgen and RPR10
.22(3)



Collaborative Research and
    Development Agreement dated October 30, 1998 between
    Introgen, RPR and NCI10
.23(1)



Non-Exclusive License Agreement,
    effective as of April 16, 1997, by Introgen and Iowa
    Research Foundation10
.24(3)



Option Agreement, effective as of
    June 1, 1998, by Introgen and Imperial Cancer Research
    Technology Limited (ICRT)10
.25(3)



Option Agreement, effective as of
    January 1, 1999, by Introgen and ICRT10
.26(3)



Exclusive License Agreement,
    effective as of July 19, 1999, by Introgen and Corixa
    Corporation10
.27(a)



Reserved10
.27(b)(1)



Letter dated January 28,
    2000, from Introgen to LXR Biotechnology (LXR), notifying LXR of
    its exercise of its option10
.27(c)(2)



Exclusive License Agreement,
    effective as of May 16, 2000, by and between Introgen and
    LXR10
.28(3)



Administrative Services and
    Management Agreement, effective as of January 1, 1999, by
    and between Introgen and Gendux, Inc.10
.29(3)



Research and Development
    Agreement, effective as of January 1, 1999, by and between
    Introgen and Gendux, Inc.10
.30(3)



Delivery Technology License
    Agreement, effective as of January 1, 1999, by and between
    Introgen and Gendux, Inc.10
.31(3)



Target Gene License Agreement,
    effective as of January 1, 1999, by and between Introgen
    and Gendux, Inc.10
.32(1)



Non-Exclusive License Agreement,
    effective as of August 17, 1998, by and between Introgen
    and National Institutes of Health10
.33



Reserved10
.34(2)



Master Lease Agreement, effective
    as of August 4, 1999, by and between Introgen and Finova
    Capital Corporation10
.35(2)



Construction Loan Agreement,
    effective as of July 24, 2000, by and between Introgen and
    Compass Bank10
.36(5)



Restated p53 and K-ras Agreement,
    effective as of June 30, 2001, by and among Introgen,
    Aventis Pharmaceuticals Inc. (API) and Aventis Pharma S.A.
    (Aventis)10
.37(5)



p53 Assignment Agreement,
    effective as of June 30, 2001, by and among Introgen, API
    and Aventis10
.38(5)



K-ras Assignment Agreement,
    effective as of June 30, 2001, by and among Introgen, API
    and Aventis10
.39



Reserved10
.40(5)



Voting Agreement, effective as of
    June 30, 2001, by and among Introgen, API and RPR10
.41



Reserved10
.42(7)



Series A Preferred Stock
    Purchase Agreement, effective as of March 7, 2002, by and
    between Introgen and VirRx, Inc.10
.43(7)



Collaboration and License
    Agreement, effective as of March 7, 2002, by and between
    Introgen and VirRx, Inc.10
.44(8)



Securities Purchase Agreement,
    effective as of June 18, 2003, by and among Introgen and
    the Investors named therein10
.45



Reserved10
.46



Reserved10
.47



Reserved10
.48



Reserved10
.49



Reserved10
.50



Reserved 68




---



##### Table of Contents



ExhibitNumber



Description of Document10
.51



Reserved10
.52



Reserved10
.53(15)



Oral Healthcare Alliance Agreement
    dated November 4, 2005, by and between Introgen and
    Colgate-Palmolive Company10
.54(15)



Common Stock Purchase Agreement
    dated November 4, 2005, by and between Introgen and
    Colgate-Palmolive Company10
.55(14)



Letter Agreement dated
    February 24, 2006, by and between Introgen and Aventis
    Pharmaceuticals, Inc.10
.56(16)



Form of Restricted Stock Purchase
    Agreement by and between Introgen and each of its non-executive
    directors10
.57(17)



Amendment No. 4 to Patent and
    Technology License Agreement dated August 1, 2006, by and
    among Introgen, The University of Texas M. D. Anderson Cancer
    Center and the Board of Regents of The University of Texas System10
.58(18)



Placement Agent Agreement dated
    November 7, 2006, by and between Introgen and Mulier
    Capital Limited10
.59



Patent and Technology License
    Agreement dated November 13, 2006, by and among Introgen,
    The University of Texas M. D. Anderson Cancer Center and the
    Board of Regents of The University of Texas System10
.60(19)



Placement Agent Agreement dated
    December 13, 2006, by and between Introgen and Mulier
    Capital Limited10
.61



Amendment No. 5 to Patent and
    Technology License Agreement dated December 18, 2006, by
    and among Introgen, The University of Texas M. D. Anderson
    Cancer Center and the Board of Regents of The University of
    Texas System14
.1(9)



Code of Conduct and Ethics21
.1



List of subsidiaries of Introgen23
.1



Consent of Independent Registered
    Public Accounting Firm24
.1



Power of Attorney (See
    page 71)31
.1



Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act, as amended32
.1



Certification of Chief Executive
    Officer and Chief Financial Officer Pursuant to 18 U.S.C.
    1350, as Adopted Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Registration Statement on
    Form S-1
    (No. 333-30582)
    filed with the SEC on February 17, 2000.(2)
    
    Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 2 to our Registration Statement on
    Form S-1
    (No. 333-30582)
    filed with the SEC on September 8, 2000.(3)
    
    Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 3 to our Registration Statement on
    Form S-1
    (No. 333-30582)
    filed with the SEC on October 4, 2000.(4)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q,
    for the quarter ended December 31, 2000, (File
    No. 000-21291),
    filed with the SEC on February 14, 2001.(5)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Annual Report on
    Form 10-K
    for the fiscal year ended June 30, 2001 (File
    No. 000-21291),
    filed with the SEC on September 19, 2001.(6)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Transition Report on
    Form 10-KT
    for the six-month transition period ended December 31, 2001
    (File
    No. 000-21291),
    filed with the SEC on March 20, 2002.(7)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q,
    for the quarter ended March 31, 2002 (File
    No. 000-21291),
    filed with the SEC on May 15, 2002.(8)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Current Report on
    Form 8-K,
    filed with the SEC on June 18, 2003.(9)
    
    See Part I, Item 1. Business  Access
    to Company Information of this Annual Report on
    Form 10-K. 69




---



##### Table of Contents



(10)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q,
    for the quarter ended June 30, 2004 (File
    No. 000-21291),
    filed with the SEC on August 16, 2004.(11)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q,
    for the quarter ended September 30, 2004 (File
    No. 000-21291),
    filed with the SEC on November 15, 2004.(12)
    
    Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 1 to our
    Form 10-K/A
    for the fiscal year ended December 31, 2003 (File
    No. 000-21291),
    filed with the SEC on April 29, 2004.(13)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q,
    for the quarter ended September 30, 2005 (File
    No. 000-21291),
    filed with the SEC on November 9, 2005.(14)
    
    Incorporated by reference to the exhibit filed with our Current
    Report on
    Form 8-K,
    filed with the SEC on February 24, 2006.(15)
    
    Incorporated by reference to the same-numbered exhibit filed
    with our Annual Report on Form 10-K, for the year ended
    December 31, 2005 (File No. 000-21291), filed with the SEC
    on March 16, 2006.(16)
    
    Incorporated by reference to the exhibit filed with our Current
    Report on
    Form 8-K,
    filed with the SEC on May 30, 2006.(17)
    
    Incorporated by reference to the exhibit filed with our
    Quarterly Report on
    Form 10-Q,
    filed with the SEC on November 6, 2006.(18)
    
    Incorporated by reference to the exhibit filed with our Current
    Report on
    Form 8-K,
    filed with the SEC on November 7, 2006.(19)
    
    Incorporated by reference to the exhibit filed with our Current
    Report on
    Form 8-K,
    filed with the SEC on December 14, 2006.
    
    Confidential treatment has been granted for portions of this
    exhibit.
    
    Confidential treatment has been requested for portions of this
    exhibit.*
    
    Indicates management contract or compensatory plan or
    arrangement.  (b)Exhibits
    (c)Financial
    Statement Schedules
   70




---



##### Table of Contents



SIGNATURES  Form 10-K
    By:
    /s/  DAVID
    G. NANCE   President, Chief Executive Officer and Director
 (Principal Executive Officer)
  By:
    /s/  JAMES
    W. ALBRECHT, JR.   Chief Financial Officer
 (Principal Financial and Accounting Officer
    POWER OF
    ATTORNEY
  attorney-in-fact, Form 10-K,
  Form 10-K
  Signature

Title

Date/s/  DAVID
    G. NANCE(David
    G. Nance)

President, Chief Executive
    Officer, and Director (Principal Executive Officer)

March 8, 2007/s/  JAMES
    W.
    ALBRECHT, JR.(James
    W. Albrecht, Jr.)

Chief Financial Officer (Principal
    Financial and Accounting Officer)

March 8, 2007/s/  JOHN
    N.
    KAPOOR, PH.D.(John
    N. Kapoor, Ph.D.)

Chairman of the Board and Director

March 8, 2007/s/  WILLIAM
    H.
    CUNNINGHAM, PH.D.(William
    H. Cunningham, Ph.D.)

Director

March 8, 2007/s/  MALCOLM
    GILLIS, PH.D.(Malcolm
    Gillis, Ph.D.)

Director

March 8, 2007/s/  CHARLES
    E. LONG(Charles
    E. Long)

Director

March 8, 2007/s/  PETER
    BARTON HUTT(Peter
    Barton Hutt)

Director

March 8, 2007  71




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
    F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               
    F-2




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS  December 31,2005


2006(Amounts in thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
28,090


$
25,578Short-term investments


5,032



15,767Total cash, cash equivalents and
    short-term investments


33,122



41,345Marketable securities


2,892



6,957Prepaid expense and other current
    assets


297



397Total current assets


36,311



48,699Property and equipment, net of
    accumulated depreciation of $12,588 and $13,976, respectively


6,181



5,172Grant rights acquired


163



Other assets


326



290Total assets

$
42,981


$
54,161LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
2,258


$
2,384Accrued liabilities and other


3,296



4,817Deferred revenue and other


472



624Current portion of notes payable


756



917Total current liabilities


6,782



8,742Notes payable, net of current
    portion


7,784



7,448Deferred revenue and other,
    long-term


1,404



923Total liabilities


15,970



17,113Commitments and Contingencies
    (Note 12)Stockholders Equity:Preferred stock, $.001 par
    value per share; 5,000 shares authorized; 4,900 shares
    issuable; zero Series A shares issued and outstanding in
    2005 and 2006, respectively






Common stock, $.001 par value
    per share; 100,000 shares authorized; 37,147 and
    43,591 shares issued and outstanding in 2005 and 2006,
    respectively


37



44Additional paid-in capital


170,675



205,350Deferred compensation


(68
)


Accumulated deficit


(143,459
)


(172,260
)Accumulated other comprehensive
    (loss) gain


(174
)


3,914Total stockholders equity


27,011



37,048Total liabilities and
    stockholders equity

$
42,981


$
54,161    F-3




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2004


2005


2006(Amounts in thousands, except per share amounts)Contract services, grant and other
    revenue

$
1,808


$
1,867


$
1,151Operating costs and expense:Research and development,
    including share-based compensation of $48, $396 and $1,024 for
    the years ended December 31, 2004, 2005 and 2006,
    respectively


20,474



21,400



18,221General and administrative,
    including share-based compensation of $205, $936 and $6,017 for
    the years ended December 31, 2004, 2005 and 2006,
    respectively


6,597



7,834



13,163Total operating costs and expense


27,071



29,234



31,384Loss from operations


(25,263
)


(27,367
)


(30,233
)Interest income


309



787



1,032Interest expense


(500
)


(621
)


(689
)Other income


1,067



1,098



1,089Net loss

$
(24,387
)

$
(26,103
)

$
(28,801
)Net loss per share, basic and
    diluted

$
(0.91
)

$
(0.80
)

$
(0.77
)Shares used in computing basic and
    diluted net loss per share


26,943



32,780



37,594    F-4




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  Series ANon-Voting

















AccumulatedConvertible








Additional








OtherPreferred Stock


Common Stock


Paid-In


Deferred


Accumulated


ComprehensiveShares


Amount


Shares


Amount


Capital


Compensation


Deficit


Loss


Total(Amounts in thousands)Balance, December 31,
    2003


100


$
1



26,539


$
27


$
124,270


$
(44
)

$
(92,969
)

$



$
31,285Issuance of common stock in a
    direct equity offering in December 2004, net of offering costs
    of $1,366










3,451



3



22,891















22,894Issuance of common stock in
    connection with exercise of stock options










380







644















644Issuance of common stock in
    connection with asset acquisition










252







1,477















1,477Addition to deferred compensation
    relating to issuance of stock options, net of reversals


















370



(297
)










73Amortization of deferred
    compensation and share-based compensation






















180











180Net loss


























(24,387
)






(24,387
)Balance, December 31,
    2004


100


$
1



30,622


$
30


$
149,652


$
(161
)

$
(117,356
)

$



$
32,166Issuance of common stock in a
    direct equity offering in November 2005, net of offering costs
    of $414










3,611



4



19,581















19,585Issuance of common stock in
    connection with exercise of stock options










457







615















615Issuance of common stock in
    connection with the grant of stock










113







687















687Addition to deferred compensation
    relating to issuance of stock options


















142



(142
)










Conversion of preferred stock to
    common stock


(100
)


(1
)


2,344



3



(2
)














Amortization of deferred
    compensation and share-based compensation






















235











235Comprehensive loss


























(26,103
)






(26,103
)Unrealized loss on marketable
    securities






























(149
)


(149
)Foreign currency translation
    adjustment, cumulative translation loss of $25 at
    December 31, 2005






























(25
)


(25
)Total comprehensive loss


































(26,277
)Balance, December 31,
    2005





$




37,147


$
37


$
170,675


$
(68
)

$
(143,459
)

$
(174
)

$
27,011Issuance of common stock in direct
    equity offerings in November and December 2006, net of offering
    costs of $2,333










6,313



6



27,696















27,702Issuance of common stock in
    connection with exercise of stock options










83



1



64















65Issuance of common stock in
    connection with the grant of stock










53







251















251Reduction of purchase price for
    Magnum Therapeutics Corporation upon final settlement










(5
)






(30
)














(30
)Share-based compensation


















6,762















6,762Amortization of deferred
    compensation


















(68
)


68











Comprehensive loss


























(28,801
)






(28,801
)Unrealized gain on marketable
    securities






























4,065



4,065Foreign currency translation
    adjustment, cumulative translation loss of $2 at
    December 31, 2006






























23



23Total comprehensive loss


































(24,713
)Balance, December 31,
    2006





$




43,591


$
44


$
205,350


$



$
(172,260
)

$
3,914


$
37,048    F-5




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2004


2005


2006(Amounts in thousands)Cash flows from operating
    activities:Net loss

$
(24,387
)

$
(26,103
)

$
(28,801
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation


1,322



1,605



1,388Share-based compensation


253



922



7,013Amortization of grant rights
    acquired


159



1,419



133Changes in assets and liabilities:(Increase) decrease in other assets


(532
)


395



(64
)Increase (decrease) in accounts
    payable


629



(425
)


126Increase (decrease) in accrued
    liabilities


773



(275
)


1,520Increase (decrease) in deferred
    revenue and other


270



714



(523
)Net cash used in operating
    activities


(21,513
)


(21,748
)


(19,208
)Cash flows from investing
    activities:Purchases of property and equipment


(1,097
)


(509
)


(185
)Purchases of short-term investments


(38,383
)


(31,869
)


(40,774
)Maturities of short-term investments


30,390



34,830



30,039Purchase of marketable securities






(3,041
)


Net cash used in investing
    activities


(9,090
)


(589
)


(10,920
)Cash flows from financing
    activities:Proceeds from sale of common stock,
    net of offering costs


22,894



19,585



27,702Proceeds from exercise of options
    for common stock


644



615



65Proceeds from notes payable


1,448



772



727Principal payments under notes
    payable and capital leases


(593
)


(707
)


(901
)Net cash provided by financing
    activities


24,393



20,265



27,593Effect of exchange rate changes on
    cash






(25
)


23Net increase (decrease) in cash


(6,210
)


(2,097
)


(2,512
)Cash and cash equivalents,
    beginning of period


36,397



30,187



28,090Cash and cash equivalents, end of
    period

$
30,187


$
28,090


$
25,578Supplemental disclosure of cash
    flow information:Cash paid for interest

$
472


$
580


$
638Cash paid for taxes for the
    issuance of common stock in connection with the grant of common
    stock

$



$
411


$
28Construction allowance for
    leasehold improvements

$



$



$
194Supplemental disclosure of non-cash
    investing and financing activities:Grant rights acquired in asset
    acquisition

$
(1,741
)

$



$
30Common stock issued for the asset
    acquisition

$
1,477


$



$
Liabilities assumed in asset
    acquisition

$
272


$



$
Non-cash unrealized gain (loss) on
    marketable securities

$



$
(149
)

$
4,065Issuance of common stock in
    connection with the grant of stock

$



$
687


$
251Proceeds from insurance financing
    notes

$
123


$
117


$
251    F-6




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

December 31,
    2006  1.
    Formation
    and Business of the Company    in vivo
    ®
           F-7




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
    Use of
    Estimates
    Cash
    and Cash Equivalents
    Short-term
    Investments
    Marketable
    Securities
  available-for-sale.
  Fair
    Value of Financial Instruments
   F-8




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Risks
    and Uncertainties
    Intangible
    Assets
    Property
    and Equipment
      December 31,2005


2006Facilities

$
12,524


$
12,813Equipment


6,245



6,335Total property and equipment


18,769



19,148Less accumulated depreciation


(12,588
)


(13,976
)Net property and equipment

$
6,181


$
5,172     Federal
    Income Taxes
   F-9




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Accrued
    Liabilities
    December 31,2005


2006Clinical costs due unrelated
    parties

$
267


$
146Pre-clinical costs due related
    parties


677



419Pre-clinical costs due unrelated
    parties


124



63Property taxes


366



372Franchise and use taxes


312



440Payroll


78



168Vacation


349



407Legal and accounting fees


490



452Securities offering costs






1,802Other vendor charges not yet billed


633



548Total accrued liabilities

$
3,296


$
4,817       Revenue
    Recognition
       F-10




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Research
    and Development Costs
        Net
    Loss Per Share
    Share-Based
    Compensation
         F-11




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Recent
    Accounting Pronouncements
    3.
    Acquisition
    of Magnum Therapeutics Corporation          Cash and cash equivalents

$
9Acquired grant rights

$
1,711   4.
    Investment
    in SR Pharma plc  available-for-sale
 F-12




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Intangible
    Assets  Intangible
    Assets With Definite Lives
    December 31,2005


2006Gross





Net


Gross


Adjustment





NetCarrying


Accumulated


Carrying


Carrying


to Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amount


Amortization


AmountAsset Acquisition:Acquired Grant Rights
    (22 month amortization period)

$
1,741


$
(1,578
)

$
163


$
1,741


$
(30
)

$
(1,711
)

$
Ending Balance

$
1,741


$
(1,578
)

$
163


$
1,741


$
(30
)

$
(1,711
)

$
     6.
    Stock
    Options      
    An exercise price equal to the fair value of the Companys
    stock at the date of grant;
    A term of ten years;
    Vesting under the following general terms:  
    For options issued to members of the Board of Directors, vesting
    monthly over 12 months.
    For options issued to our Chief Executive Officer, 100% vesting
    on the date of grant.
    For options issued to all other persons, cliff vesting at the
    rate of 25% per year over four years.    and/or
 F-13




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year Ended December 31,2004


2005Net loss, as reported

$
(24,387
)

$
(26,103
)Add: Share-based employee
    compensation expense included in reported net loss


32



1,098Deduct: Total share-based employee
    compensation expense determined under the fair value based
    method for all awards


(2,834
)


(5,268
)Pro forma net loss

$
(27,189
)

$
(30,273
)Loss per share:Basic and Diluted  as
    reported

$
(0.91
)

$
(0.80
)Basic and Diluted  pro
    forma

$
(1.01
)

$
(0.92
)       Weighted Average

Weighted AverageOptions

Exercise Price

Remaining

Aggregate IntrinsicOutstanding

per Share

Contractual Life

Value(In thousands)Balance, December 31, 2005


5,978,369


$
4.49



6.84



Granted


1,799,350



4.78






$
14Exercised


(83,389
)


0.78






$
336Cancelled


(132,150
)


6.25







Balance, December 31, 2006


7,562,180



4.57



6.69


$
4,855Vested at December 31, 2006
    and expected to vest


7,283,619



4.55



6.63


$
4,784Exercisable at December 31,
    2006


4,938,388



4.19



5.87


$
4,486  F-14




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    The weighted average fair value of options granted during the
    years ended December 31, 2006, 2005 and 2004 was $3.50,
    $5.71 and $5.43, respectively;
    The aggregate intrinsic value of stock options at exercise
    during the years ended December 31, 2006, 2005 and 2004 was
    $336,000, $2.5 million and $1.6 million, respectively;
    The aggregate intrinsic value of stock options vested during the
    years ended December 31, 2006, 2005 and 2004, was $114,000,
    $406,000 and $2.8 million, respectively; and
    The total unrecognized share-based compensation expense related
    to unvested stock options and subject to recognition in future
    periods was approximately $8.2 million as of
    December 31, 2006. This amount relates to approximately
    2.6 million shares with a per share weighted average fair
    value of $4.41. We anticipate this expense to be recognized over
    a weighted average period of approximately 2.1 years.    Year Ended December 31,2004


2005


2006Expected volatility


96.04
%


89.07
%


85.26
%Risk free interest rate


4.45
%


4.08
%


4.74
%Expected dividend yield


0.00
%


0.00
%


0.00
%Expected life, in years


10.00



10.00



5.76     
    The expected volatility is calculated using the daily historical
    volatility of our common stock over a term that approximates the
    expected life of the option grants. The range of our volatility
    estimates for the years ended December 31, 2006, 2005 and
    2004 was 74.2% to 90.5%, 86.0% to 91.8% and 93.8% to 100.5%,
    respectively;
    The risk-free interest rate is based on the U.S. treasury
    yield curve for five to seven-year terms for the year ended
    December 31, 2006 and the ten-year zero coupon treasury
    bill rate for the years ended December 31, 2005 and 2004,
    respectively. The range of our risk-free interest rates for the
    years ended December 31, 2006, 2005 and 2004 was 4.29% to
    5.10%, 3.94% to 4.49% and 3.00% to 5.25%, respectively; and
    As allowed by Staff Accounting Bulletin No. 107, we
    have elected to apply the shortcut approach in
    developing our estimate of expected term for plain
    vanilla stock options granted in 2006 by using the
    mid-point between the vesting date and contractual termination
    date.      
    In 2006, we recorded compensation expense of $70,000 as a result
    of granting shares to certain employees in connection with
    expiring stock options;
    In 2006, we recorded compensation expense of $209,000 as a
    result of granting shares to directors of the board for services
    rendered; F-15




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    In 2005, we recorded compensation expense of $1.1 million
    as a result of granting shares to certain of our officers in
    connection with expiring stock options (see Common
    Stock Grant to Officersin Note 8 below); and
    In 2004, we recorded compensation expense of (1) $35,000
    resulting from the acceleration of vesting of options previously
    granted to a certain member of the Board of Directors upon his
    resignation from the Board of Directors and (2) $38,000 as
    a result of granting stock options fully vested upon issuance to
    a non-employee consultant for whom options granted are subject
    to fair value accounting.  7.
    Stock
    Purchase Warrants  time-to-time,
      8.
    Stockholders
    Equity  Stock
    Sales
       F-16




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Common
    Stock Grant to Officers
      Conversion
    of Preferred Stock to Common Stock
      Form S-3 No. 333-129687)
  Employee
    Stock Purchase Plan
   F-17




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Shares Reserved
    For Future Issuance
    Common
    Stock Purchase Warrant
    9.
    Federal
    Income Taxes      2005


2006Deferred tax assets:Current deferred tax assetsAccrued liabilities

$
799


$
665Unrealized gains and losses


64



1,332Valuation allowance for current
    deferred tax assets


(862
)


(1,994
)Net current deferred tax assets


1



3Noncurrent deferred tax assetsNet operating loss carryforwards


40,242



44,499Research and development tax
    credits


1,625



1,103Orphan drug tax credits


9,878



11,357Tax basis of property and
    equipment in excess of book basis


2,949



3,001Stock compensation


1,380



2,427Deferred rent


520



337Investments


860



841Other


62



60Valuation allowance for noncurrent
    deferred tax assets


(57,377
)


(63,527
)Net noncurrent deferred tax assets


139



98 F-18




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2005


2006Deferred tax liabilities:Current deferred tax liabilitiesPrepaid expense


(80
)


(101
)Total current deferred tax
    liabilities


(80
)


(101
)Noncurrent deferred tax liabilitiesAcquired grant rights


(60
)


Total noncurrent deferred tax
    liabilities


(60
)


Net current deferred tax asset
    (liability)


(79
)


(98
)Net noncurrent deferred tax asset
    (liability)

$
79


$
98         Year Ended December 31,2004


2005


2006Federal statutory rate


(34.0
)%


(34.0
)%


(34.0
)%State taxes, net of federal benefit


(2.6
)


(2.8
)


Increase in deferred tax valuation
    allowance


66.0



42.5



20.9Stock option compensation


(7.4
)


1.1



4.0Orphan drug tax credits


(20.9
)


(5.0
)


(3.4
)Research and development tax
    credits


(2.5
)


(0.7
)


(0.4
)Change in Texas tax law










10.7Other


1.4



(1.1
)


(2.2
)
%



%



%   10.
    Notes Payable     F-19




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Year ending December 31, 2007

$
9172008


4822009


3152010


2472011


266Thereafter


6,138Total

$
8,365     11.
    License
    and Research Agreements  Patent
    and Technology License Agreement With The University of Texas
    System
    VirRx,
    Inc.
     F-20




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Alliance
    Agreement With Colgate-Palmolive Company
    FUS-1)
    Other
    Technology Option and License Agreements
   F-21




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    12.
    Commitments
    and Contingencies  Lease
    Commitments
      OperatingLeasesYear ending December 31, 2007

$
5082008


4922009


3022010


1562011


156Thereafter


2,303Total minimum lease payments

$
3,917   Insurance
    and Litigation
    Employment
    Agreement
    13.
    Related
    Parties     F-22




---



##### Table of Contents



INTROGEN
    THERAPEUTICS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    month-to-month
            14.
    London
    Stock Exchange    15.
    Subsequent
    Event  Form S-3 No. 333-140424),
 F-23




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber



Description of Document10
.59



Patent and Technology License
    Agreement dated November 13, 2006, by and among Introgen,
    The University of Texas M. D. Anderson Cancer Center and the
    Board of Regents of The University of Texas System10
.61



Amendment No. 5 to Patent and
    Technology License Agreement dated December 18, 2006, by
    and among Introgen, The University of Texas M. D. Anderson
    Cancer Center and the Board of Regents of The University of
    Texas System21
.1



List of subsidiaries of Introgen23
.1



Consent of Independent Registered
    Public Accounting Firm24
.1



Power of Attorney (See
    page 71)31
.1



Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act, as amended32
.1



Certification of Chief Executive
    Officer and Chief Financial Officer Pursuant to 18 U.S.C.
    1350, as Adopted Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002     
    
    Confidential treatment has been requested for portions of this
    exhibit.