##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2004                                                 
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to          .                                  

Commission file number: 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(Address of principal executive offices) |  | 78701(Zip Code)                            

Registrants telephone number, including area code:


(512) 708-9310


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


None


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


Common Stock, $0.001 par value


þ o


þ


þ o






DOCUMENTS INCORPORATED BY REFERENCE












---










INTROGEN THERAPEUTICS, INC.


ANNUAL REPORT ON FORM 10-K


TABLE OF CONTENTS


|                                                         |  |                                                                                                                       |    |  |    |  |  | 
|-------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- | -- |  | -- |  |  | 
|PART I                                                  
|Item 1.                                                  |  | Business                                                                                                              |    |  | 1  | 
|Item 2.                                                  |  | Properties                                                                                                            |    |  | 27 | 
|Item 3.                                                  |  | Legal Proceedings                                                                                                     |    |  | 27 | 
|Item 4.                                                  |  | Submission of Matters to a Vote of Security
    Holders                                                               |    |  | 27 | 
|PART II                                                 
|Item 5.                                                  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of  Equity
    Securities |    |  | 28 | 
|Item 6.                                                  |  | Selected Financial Data                                                                                               |    |  | 29 | 
|Item 7.                                                  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                             |    |  | 30 | 
|Item 7A.                                                 |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                        |    |  | 53 | 
|Item 8.                                                  |  | Financial Statements and Supplementary
    Data                                                                       |    |  | 53 | 
|Item 9.                                                  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                              |    |  | 53 | 
|Item 9A.                                                 |  | Controls and Procedures                                                                                               |    |  | 53 | 
|Item 9B.                                                 |  | Other Information                                                                                                     |    |  | 54 | 
|PART III                                                
|Item 10.                                                 |  | Directors and Executive Officers of the
    Registrant                                                                |    |  | 54 | 
|Item 11.                                                 |  | Executive Compensation                                                                                                |    |  | 54 | 
|Item 12.                                                 |  | Security Ownership of Certain Beneficial
    Owners and Management                                                    |    |  | 54 | 
|Item 13.                                                 |  | Certain Relationships and Related
    Transactions                                                                    |    |  | 55 | 
|Item 14.                                                 |  | Principal Accounting Fees and Services                                                                                |    |  | 55 | 
|PART IV                                                 
|Item 15.                                                 |  | Exhibits and Financial Statement
    Schedules                                                                        |    |  | 56 | 
|Signatures                                               |  |                                                                                                                       | 60 | 
|List of Subsidiaries of Introgen                        
|Consent of Independent Registered Public Accounting Firm
|Certification of CEO and CFO                            
|Certification of CEO and CFO Pursuant to Section 906    





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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 and Section 21E of the Securities
Exchange Act of 1934. These statements include, among others,
statements concerning our future operations, financial condition
and prospects, and our business strategies. The words
believe, expect, anticipate
and other similar expressions generally identify forward-looking
statements. Investors in our common stock are cautioned not to
place undue reliance on these forward-looking statements. These
forward-looking statements are subject to substantial risks and
uncertainties that could cause our future business, financial
condition, or results of operations to differ materially from
historical results or currently anticipated results. Investors
should carefully review the information contained under the
caption Risk Factors in Managements
Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in, or incorporated by reference
into, this Annual Report on Form 10-K.


Access to Company Information


www.introgen.com.


www.introgen.com


Overview




in
vivo




1



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2



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| |   |                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A Phase 2 clinical trial of ADVEXIN therapy combined with
    systemic chemotherapy for the treatment of breast cancer prior
    to surgery and a Phase 1 clinical trial using ADVEXIN
    therapy in patients with locally recurrent breast cancer
    involving the chest wall;                                                                                              
|
| |  | 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 2 clinical trial of ADVEXIN therapy administered as
    a complement to radiation therapy in non-small cell lung cancer;                                                                                                                                                                                                                                               
|
| |  | A Phase 1/early Phase 2 clinical trial of ADVEXIN
    therapy for the treatment of advanced, unresectable squamous
    cell esophageal cancer;                                                                                                                                                                                                                                 
|
| |  | 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;                                                                                                                      
|
| |  | A Phase 1 clinical trial of ADVEXIN therapy in prostate
    cancer; and                                                                                                                                                                                                                                                                                                        
|
| |  | A Phase 1 clinical trial of ADVEXIN therapy in
    bronchoalveolar cancer.                                                                                                                                                                                                                                                                                                     

Clinical Cancer Research Proceedings of the American
Society for Clinical Oncology








3



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Molecular Cancer
Therapeutics. The
Laryngoscope Conquest








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | INGN 241 for the treatment of solid tumors and melanoma, a
    deadly form of skin cancer. INGN 241 combines the mda-7 gene
    with our adenoviral vector system to kill tumor cells, including
    metastatic tumor cells, through multiple mechanisms. A
    Phase 1/early Phase 2 trial indicated that in patients
    with various solid tumors, INGN 241 is well tolerated, displays
    minimal toxicity and is biologically active.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | INGN 225 uses the p53 tumor suppressor gene as the basis for a
    highly specific therapeutic cancer vaccine that stimulates a
    particular type of immune system cell known as a dendritic cell.
    Findings during pre-clinical testing suggest a vaccine
    consisting of dendritic cells stimulated by ADVEXIN therapy
    could have broad utility as a treatment for progression of solid
    tumors. Introgen academic collaborators are conducting
    Phase 1 and early stage Phase 2 clinical trials to
    study INGN 225 small cell lung cancer and breast cancer. Certain
    patients initially unresponsive to chemotherapy will be
    re-treated with chemotherapy to study the effect that INGN 225
    therapy may have.                                                                                                                                                           
|
| |  | INGN 234 for the prevention of oral cancers and the treatment of
    oral leukoplakia. We are conducting a Phase 1/early
    Phase 2 clinical trial in which p53 is being administered
    in an oral mouthwash formulation to prevent precancerous oral
    lesions from developing into cancerous lesions. We are
    conducting pre-clinical work on other topical administrations of
    tumor suppressor genes to control or prevent oral or dermal
    cancers. We are investigating multiple delivery platforms,
    including both viral and non-viral approaches. We are also
    investigating combining gene delivery with rinses, patches,
    ointments and enhancing polymers. We believe the opportunity
    exists to develop non-toxic treatments for pre-malignant and
    malignant cells that can be easily exposed to natural biological
    tumor suppressor and DNA repairing genes.
|
| |  | INGN 401, our systemically-delivered nanoparticle tumor
    suppressor therapy that uses the FUS-1 gene, a gene frequently
    altered or missing in the development of many solid tumors.
    Pre-clinical studies have shown gene delivery of FUS-1
    significantly inhibits the growth of tumors and greatly reduces
    metastatic spread of lung cancer in animals when delivered to
    tumor cells via either an adenoviral or non-viral delivery
    system. INGN 401 is being studied in a Phase1/2 clinical trial
    for end-stage, non-small cell lung cancer patients.                                                                                                                                                                                                                                                                                                                      
|
| |  | INGN 402 describes a systemic, nanoparticle formulation
    containing the p53 tumor suppressor gene and INGN 403 describes
    a systemic, nanoparticle formulation containing the mda-7 tumor
    suppressor gene, also known as interleukin 24. Early studies
    with these new nanoparticle drugs have demonstrated a good
    safety profile and promising anti-cancer activity in murine lung
    tumor models. Data from the mda-7 nanoparticle studies was
    recently published in DNA and Cell Biology.                                                                                                                                                                                                                                                                                                                                                                                        

4



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| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | INGN 007, a replication-competent viral therapy that
    over-expresses an adenoviral gene and thereby causes rapid
    disruption of tumor cells in which the adenovirus replicates.
    Pre-clinical testing indicates INGN 007 can eradicate human
    tumors in animal models.



Background




| |                           
| | --------------------------
| | Gene Function and Genomics







| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Molecular Cancer Therapies Using Tumor Suppressors and
    Gene and Gene-Induced Protein Therapy Products





5



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| |                          
| | -------------------------
| | Cancer, a Genetic Disease







6



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| |                       
| | ----------------------
| | Tumor Suppressor Genes







| |                            
| | ---------------------------
| | Current Treatment of Cancer







The Introgen Approach




7



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in vivo








The Introgen Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Develop and Commercialize ADVEXIN therapy and INGN 241 for
    Multiple Cancer Indications. We plan to continue developing
    ADVEXIN therapy using the p53 gene and our INGN 241 product
    using the mda-7 gene in multiple cancer indications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Develop Our Portfolio of Gene-Induced Protein Therapy and
    Other Drug Products. Utilizing our significant research,
    clinical, regulatory and manufacturing expertise, we are
    evaluating development of additional gene-induced protein
    therapies for various cancers, such as INGN 225, a highly
    specific therapeutic cancer vaccine, INGN 234 , an oral rinse or
    mouthwash formulation containing the p53 tumor suppressor, INGN
    401 using the FUS-1 gene and INGN 007, a replication-competent
    viral therapy. We have established an efficient process for
    evaluating new drug candidates and advancing them from
    pre-clinical to clinical development. We have identified and
    licensed multiple technologies, which we intend to combine with
    our adenoviral and non-viral vector systems and which we believe
    are attractive development targets for the treatment of various
    cancers. We are also evaluating the development of mebendazole
    (INGN 601), our first small molecule product candidate. We
    intend to evaluate additional opportunities to in-license or
    acquire new technologies.
|
| |  | Develop a Nanoparticle Systemic Administration Platform.
    Early studies with these new nanoparticle drugs have
    demonstrated a good safety profile and promising anti-cancer
    activity. We incorporate the p53 tumor suppressor and the mda-7
    gene 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. 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

8



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | 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 gene function and vector development to pursue
    gene-based protein 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.

Product Development Programs




|                                               |  |                             |  |                    
|---------------------------------------------- |  | --------------------------- |  | -------------------
|Product (Gene)**                               |  | Cancer Indication           |  | Development Status 
|                                               |  |                             |  |                    
|ADVEXIN Therapy (p53)                          |  | Head and Neck (both         |  | Phase 3            
|                                               |  | monotherapy and combined    |  |                    
|                                               |  | with chemotherapy)          |  |                    
|                                               |  | Non-Small Cell Lung         |  | Phase 2 completed  
|                                               |  | (combined with XRT)         |  |                    
|                                               |  | Breast (combined with       |  | Phase 1-2 completed
|                                               |  | chemotherapy)               |  |                    
|                                               |  | Perioperative (and surgery) |  | Phase 1-2          
|                                               |  | Esophageal                  |  | Phase 1-2          
|                                               |  | Prostate                    |  | Phase 1 completed* 
|                                               |  | Intravenous Administration  |  | Phase 1 completed* 
|                                               |  | Ovarian                     |  | Phase 1 completed* 
|                                               |  | Bladder                     |  | Phase 1 completed* 
|                                               |  | Bronchoalveolar             |  | Phase 1 completed* 
|                                               |  | Brain (glioblastoma)        |  | Phase 1 completed* 
|                                               |  | Rheumatoid Arthritis        |  | Pre-clinical       
|INGN 225 (p53 vaccine)                         |  | Small Cell Lung             |  | Phase 1-2          
|                                               |  | Breast                      |  | Phase 1-2          
|INGN 234 (p53 topical)                         |  | Oral Cancer Prevention      |  | Phase 1-2*         
|                                               |  | (mouthwash)                 |  |                    
|INGN 241 (mda-7)                               |  | Various (solid tumors)      |  | Phase 1-2 completed
|                                               |  | Melanoma                    |  | Phase 1-2          
|                                               |  | Pancreatic                  |  | Pre-clinical       
|                                               |  | Breast                      |  | Pre-clinical       
|INGN 401 (FUS-1 program)                       |  | Lung                        |  | Phase 1            
|INGN 402 nanoparticle formulation (p53)        |  | Various cancers             |  | Pre-clinical       
|INGN 403 nanoparticle formulation (mda-7)      |  | Various cancers             |  | Pre-clinical       
|INGN 007 (Replication-Competent viral therapy) |  | Various (solid tumors)      |  | Pre-clinical       






|  |                                                             
|- | ------------------------------------------------------------
|* | Conducted in conjunction with the National Cancer Institute.



|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|** | We hold the worldwide commercial rights to the product
    candidates related to each of these programs.

9



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| |                                       
| | --------------------------------------
| | Indications for ADVEXIN® Therapy (p53)





| |                     
| | --------------------
| | Head and Neck Cancer











10



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11



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| |                           
| | --------------------------
| | Non-Small Cell Lung Cancer







12



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Clinical Cancer Research.






| |              
| | -------------
| | Breast Cancer





| |                
| | ---------------
| | Prostate Cancer







| |              
| | -------------
| | Other Cancers



13



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Ovarian Cancer.


Bladder Cancer.


Brain Cancer (Glioblastoma).


Bronchoalveolar Cancer. Proceedings of the American
Society for Clinical Oncology


Esophageal Cancer.




| |                         
| | ------------------------
| | Pre-Cancerous Conditions





| |                                 
| | --------------------------------
| | Indications for INGN 241 (mda-7)



14



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Molecular Therapy, Oncogene,
Surgery International Immunopharmacolgy.






| |                                       
| | --------------------------------------
| | Indications for INGN 225 (p53 vaccine)

Current Opinion in Drug
Discovery & Development




| |                                 
| | --------------------------------
| | Indications for INGN 401 (FUS-1)

Cancer
Gene Therapy Cancer Research.


15



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Research and Development Programs










Clinical Cancer Research Molecular Cancer Therapeutics.




Introgen Enabling Technologies






| |                       
| | ----------------------
| | Viral Delivery Systems



16



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| |                                        
| | ---------------------------------------
| | Nanoparticle Systemic Delivery Platform



DNA and Cell
Biology.




| |                                             
| | --------------------------------------------
| | Replication Competent Viral Delivery Systems

Cancer Research.




| |                                 
| | --------------------------------
| | Additional Enabling Technologies





| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Multi-Gene Vector System. This technology is designed to
    combine multiple genes 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 gene at a time for
    disease treatment.                                                                                      
|
| |  | Pro-Apoptotic Gene Delivery System. This technology is
    designed to allow the activity of pro-apoptotic, or
    apoptosis-inducing, genes during treatment only, while
    temporarily suppressing the ability of the apoptotic gene 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 limit the activity of the gene for disease treatment
    to particular cell types. It is intended to be applied to both
    viral and non-viral vectors.                                                                                                                                          

Manufacturing and Process Development






17



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Business and Collaborative Arrangements




| |            
| | -----------
| | VirRx, Inc.









Academic and Other Collaborations






| |                                                         
| | --------------------------------------------------------
| | The University of Texas M. D. Anderson Cancer
    Center





18



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| |                          
| | -------------------------
| | National Cancer Institute





| |                   
| | ------------------
| | Corixa Corporation





| |                                                                  
| | -----------------------------------------------------------------
| | The University of South Florida and the Moffitt Cancer
    Center



Research and Development Expense




Marketing and Sales




19



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Patents and Intellectual Property




| |              
| | -------------
| | Our Portfolio







| |                                          
| | -----------------------------------------
| | Adenoviral p53 Compositions and Therapies





| |                                      
| | -------------------------------------
| | Combination Therapy with the p53 Gene





| |                                                    
| | ---------------------------------------------------
| | Adenovirus Production, Purification and Formulation



20



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| |                             
| | ----------------------------
| | Other Tumor Suppressor Genes





| |                                                            
| | -----------------------------------------------------------
| | Other Therapeutic, Composition and Process
    Technologies





| |                                                    
| | ---------------------------------------------------
| | Benzimidazole Small Molecule Cancer Therapy Program





| |              
| | -------------
| | Trade Secrets



21



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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.                                                     







| |                     
| | --------------------
| | Pre-Clinical Testing





| |                
| | ---------------
| | Clinical Trials



22



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| |                              
| | -----------------------------
| | National Institutes of Health







| |                       
| | ----------------------
| | Marketing Applications









23



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| |                
| | ---------------
| | Orphan Drug Act







| |                
| | ---------------
| | Off-Label Use

New England Journal of Medicine,




| |                    
| | -------------------
| | Fast Track Products

Fast Track Designation.




24



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.











| |              
| | -------------
| | International



Competition




25



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Human Resources






| |                          
| | -------------------------
| | Scientific Advisory Board



Jack A. Roth, M.D.


Carol L. Prives, Ph.D


Daniel D. Von Hoff, M.D.


26



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Elizabeth Grimm, Ph.D


Michael J. Imperiale, Ph.D







|        |           
|------- | ----------
|Item 2. | Properties














|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings










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



27



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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 |   |       | Low | 
|                                     |                       |      |   |       |     | 
|Fiscal Year Ended December 31, 2003: |                       |      |   |       |     |  |   |     
|                                     | First Fiscal Quarter  |      | $ | 3.36  |     |  | $ | 1.97 | 
|                                     | Second Fiscal Quarter |      |   | 10.16 |     |  |   | 2.00 | 
|                                     | Third Fiscal Quarter  |      |   | 11.24 |     |  |   | 5.26 | 
|                                     | Fourth Fiscal Quarter |      |   | 10.20 |     |  |   | 6.95 | 
|Fiscal Year Ended December 31, 2004: |                       |      |   |       |     |  |   |     
|                                     | First Fiscal Quarter  |      | $ | 10.37 |     |  | $ | 7.29 | 
|                                     | Second Fiscal Quarter |      |   | 9.20  |     |  |   | 4.20 | 
|                                     | Third Fiscal Quarter  |      |   | 7.10  |     |  |   | 2.96 | 
|                                     | Fourth Fiscal Quarter |      |   | 9.81  |     |  |   | 5.00 | 



Dividend Policy




Sales of Unregistered Securities




Stock Repurchases




28



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|-------------------------------------------------------------- |  | --------------------------------------- | ------- | ---------------- | ------------ | - | ------ | ----------------------- | ----------- | - | ------- | - |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                                               |  |                                         |         | Six Months Ended |              |   |       
|                                                               |  | Year Ended                              |         |                  | December 31, |   |        | Year Ended December 31, |            
|                                                               |  | June 30,                                |         |                  |              |   |        |                         |            
|                                                               |  | 2001(b)                                 |         |                  | 2000(c)      |   |        | 2001(b)                 |             |   | 2001(c) |   |  | 2002(a) |         |   | 2003(a) |   |         | 2004(a) | 
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|                                                               |  |                                         |         | (Unaudited)      |              |   |        |                         | (Unaudited) |   |         |   |  |         |         |  
|                                                               |  | (In thousands except per share amounts) |        
|Statement of Operations Data:                                  |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|Contract services, grants and other revenue                    |  | $                                       | 684     |                  |              | $ | 391    |                         |             | $ | 298     |   |  | $       | 591     |   |         | $ | 1,173   |         |  | $ | 304     |   |  | $ | 1,808   |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Collaborative research and development revenues from affiliate |  |                                         | 3,016   |                  |              |   | 3,016  |                         |             |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Product sales to affiliate                                     |  |                                         | 1,500   |                  |              |   | 1,500  |                         |             |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|Cost of product sales                                          |  |                                         | 2,488   |                  |              |   | 2,488  |                         |             |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Gross margin on product sales                                  |  |                                         | (988    | )                |              |   | (988   | )                       |             |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Operating costs and expenses:                                  |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|Research and development                                       |  |                                         | 15,014  |                  |              |   | 5,153  |                         |             |   | 10,063  |   |  |         | 19,923  |   |         |   | 21,512  |         |  |   | 14,973  |   |  |   | 20,474  |  
|General and administrative                                     |  |                                         | 4,875   |                  |              |   | 2,040  |                         |             |   | 3,526   |   |  |         | 6,361   |   |         |   | 6,722   |         |  |   | 6,102   |   |  |   | 6,597   |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Total operating costs and expenses                             |  |                                         | 19,889  |                  |              |   | 7,193  |                         |             |   | 13,589  |   |  |         | 26,284  |   |         |   | 28,234  |         |  |   | 21,075  |   |  |   | 27,071  |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Loss from operations                                           |  |                                         | (17,177 | )                |              |   | (4,774 | )                       |             |   | (13,291 | ) |  |         | (25,693 | ) |         |   | (27,061 | )       |  |   | (20,771 | ) |  |   | (25,263 | )
|Interest income (expense), net                                 |  |                                         | 381     |                  |              |   | 403    |                         |             |   | 445     |   |  |         | 423     |   |         |   | (207    | )       |  |   | 393     |   |  |   | (191    | )
|Other income                                                   |  |                                         | 354     |                  |              |   |       |                         |             |   | 518     |   |  |         | 871     |   |         |   | 1,140   |         |  |   | 1,052   |   |  |   | 1,067   |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Net loss                                                       |  | $                                       | (16,442 | )                |              | $ | (4,371 | )                       |             | $ | (12,328 | ) |  | $       | (24,399 | ) |         | $ | (26,128 | )       |  | $ | (19,326 | ) |  | $ | (24,387 | )
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Net loss per share, basic and diluted                          |  | $                                       | (1.02   | )                |              | $ | (0.39  | )                       |             | $ | (0.58   | ) |  | $       | (1.14   | ) |         | $ | (1.22   | )       |  | $ | (0.84   | ) |  | $ | (0.91   | )
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 
|Shares used in computing basic and diluted net loss per share  |  |                                         | 16,163  |                  |              |   | 11,121 |                         |             |   | 21,440  |   |  |         | 21,440  |   |         |   | 21,471  |         |  |   | 22,902  |   |  |   | 26,943  |  
|                                                               |  |                                         |         |                  |              |   |        |                         |             |   |         |   |  |         |         |   |         |   |         |         | 

|                                                   |  |                |         |              |         |   |         |         |  |   |         |   |  |         |         |   |  |   |          |  
|-------------------------------------------------- |  | -------------- | ------- | ------------ | ------- | - | ------- | ------- |  | - | ------- | - |  | ------- | ------- | - |  | - | -------- | -
|                                                   |  |                |         | December 31, |        
|                                                   |  | June 30,       |         |              |         |  
|                                                   |  | 2001(b)        |         |              | 2001(b) |   |         | 2002(b) |  |   | 2003(a) |   |  | 2004(a) |        
|                                                   |  |                |         |              |         |   |         |         |  |   |         |   |  |         |        
|                                                   |  | (In thousands) |        
|Balance Sheet Data:                                |  |                |         |              |         |   |         |         |  |   |         |   |  |         |         |   |  |   |          |  
|Cash, cash equivalents, and short-term investments |  | $              | 34,977  |              |         | $ | 48,825  |         |  | $ | 23,467  |   |  | $       | 36,397  |   |  | $ | 38,180   |  
|Working capital                                    |  |                | 54,296  |              |         |   | 43,175  |         |  |   | 18,852  |   |  |         | 31,091  |   |  |   | 31,981   |  
|Total assets                                       |  |                | 72,347  |              |         |   | 60,424  |         |  |   | 33,316  |   |  |         | 44,483  |   |  |   | 48,057   |  
|Notes payable, net of current portion              |  |                | 9,798   |              |         |   | 9,037   |         |  |   | 7,435   |   |  |         | 6,714   |   |  |   | 7,901    |  
|Accumulated deficit                                |  |                | (35,186 | )            |         |   | (47,515 | )       |  |   | (73,643 | ) |  |         | (92,969 | ) |  |   | (117,356 | )
|Stockholders equity                               |  |                | 56,069  |              |         |   | 44,566  |         |  |   | 19,835  |   |  |         | 31,285  |   |  |   | 32,166   |  






|    |                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The selected consolidated statement of operations data for the
    years ended December 31, 2004, 2003 and 2002 and the
    consolidated balance sheet data as of December 31, 2004 and
    2003, are derived from the audited consolidated financial
    statements of Introgen Therapeutics, Inc. and our subsidiaries,
    which appear in Part IV of this Report.



|    |  |                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The selected consolidated statement of operations data for the
    six months ended December 31, 2001 and the year ended
    June 30, 2001 and the consolidated balance sheet data as of
    December 31, 2002 and 2001

29



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|    |  |                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | and June 30, 2001, are derived from the audited
    consolidated financial statements of Introgen Therapeutics, Inc.
    not included in this Report.                                                                                             
|   
|(c) |  | The selected consolidated statement of operations data for the
    year ended December 31, 2001 and the six months ended
    December 31, 2000 are derived from the unaudited
    consolidated financial statements of Introgen Therapeutics, Inc.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 Report on
Form 10-K. The discussion and analysis contains
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These
statements include the statements below under Risk
Factors. These forward-looking statements are based on our
current expectations and entail various risks and uncertainties.
Our actual results could differ materially from those projected
in the forward-looking statements as a result of various
factors, including those set forth below under Risk
Factors.


Overview








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|                          |  |   |       | 
|------------------------- |  | - | ----- | 
|Cash and cash equivalents |  | $ | 9     | 
|Acquired grant rights     |  | $ | 1,741 | 



31



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Critical Accounting Policies


Use of Estimates.


Cash, Cash Equivalents and Short-term Investments.


Research and Development Costs.


Recently Issued Accounting Pronouncements




32



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Results of Operations




| |                                                         
| | --------------------------------------------------------
| | Comparison of Years Ended December 31, 2004 and
    2003



| |         
| | --------
| | Revenues

Contract Services, Grant and Other Revenue.




| |                   
| | ------------------
| | Costs and Expenses

Research and Development.


General and Administrative.


33



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Compensation Related to the Issuance of Stock Options.




| |   |                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Stock options granted to certain members of our Board of
    Directors for which some of the options were fully vested upon
    issuance and had exercise prices below the market value of our
    common stock at the date of grant, which resulted in
    compensation expense;
|
| |  | Stock options, which were fully vested upon issuance, issued to
    our corporate secretary, who is not a director or employee and
    for whom option grants result in compensation charges under fair
    value accounting; and                                                
|
| |  | Amortization of deferred compensation remaining from stock
    options granted in earlier periods.                                                                                                                                                                               





| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The options granted to members of our Board of Directors during
    the 2004 period had exercise prices equal to the market value of
    our common stock at the date of grant, resulting in no
    compensation expense;                  
|
| |  | The options granted to our corporate secretary during the 2004
    period vest over multiple periods, resulting in recognition of
    some of the compensation expense arising from those options
    being deferred to future periods; and
|
| |  | Deferred compensation related to previously granted stock
    options became fully amortized in previous periods.                                                                                                                          







| |                                                   
| | --------------------------------------------------
| | Interest Income, Interest Expense and Other Income





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| |                                                         
| | --------------------------------------------------------
| | Comparison of Years Ended December 31, 2003 and
    2002



| |         
| | --------
| | Revenues

Contract Services, Grant and Other Revenue.




| |                   
| | ------------------
| | Costs and Expenses

Research and Development.


General and Administrative.


Compensation Related to the Issuance of Stock Options.




| |                                                   
| | --------------------------------------------------
| | Interest Income, Interest Expense and Other Income







35



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Liquidity and Capital Resources






| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $49.7 million of collaborative research and development
    payments from Aventis;                                                                                                        
|
| |  | $41.4 million of equity sales in December 2003 and December
    2004 through registered direct offerings under a shelf
    registration filed with the Securities and Exchange Commission;
|
| |  | $39.4 million of private equity sales to Aventis;                                                                                                                                         
|
| |  | $32.2 million of net proceeds from our initial public
    offering in October 2000;                                                                                                       
|
| |  | $26.6 million of private equity sales, net of offering
    costs, to others (including $10.8 million from the private
    sale of our common stock in June 2003);                         
|
| |  | $15.4 million from contract services, grants, interest and
    other income;                                                                                                              
|
| |  | $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                                                                               
|
| |  | $5.1 million in leases and notes payable from commercial
    lessors and lenders to acquire equipment pledged as collateral
    for those leases and notes.                               





36



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| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Lower depreciation during the 2004 period compared to the 2003
    period as accelerated depreciation methods result in lower
    depreciation charges as property and equipment ages;                                                            
|
| |  | Lower compensation related to stock options in the 2004 period
    compared to the 2003 period for the reasons discussed above
    under Costs and Expenses  Compensation Related
    to the Issuance of Stock Options;                        
|
| |  | A larger increase in accounts payable and accrued liabilities in
    the 2004 period compared to the 2003 period due to a higher
    level of operating activity and expenses resulting in increased
    liabilities to be paid in the future; and
|
| |  | An increase in deferred revenue that was comparable between
    periods due to no change of significance related to the tenants
    to whom we sublease space in our facility.                                                                    





| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increased property and equipment purchases to support the
    ongoing needs of our business; and                                                                                                                                                                                            
|
| |  | Resumption during the first quarter of 2004 of our investments
    in financial instruments with original maturities in excess of
    three months, primarily as a result of cash from the sale of
    shares of our common stock in December 2003 being available for
    such investments.







| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The 2004 amount including $22.9 million of net proceeds
    from the sale of 3.5 million shares of our common stock in
    December 2004, whereas the 2003 amount includes
    $10.8 million of net proceeds from the sale of
    2.0 million shares of our common stock in June 2003 and
    $18.5 million of net proceeds from the sale of
    2.9 million shares of our common stock in December 2003;
|
| |  | Increased borrowings under notes payable during the 2004 period
    primarily as a result of (a) proceeds received during the
    2004 period from the refinancing of the mortgage note payable
    related to our facilities and (b) borrowings under notes
    payable during the 2004 period to finance the increased
    purchases of equipment;                                                     
|
| |  | Decreased principal payments under capital lease obligations and
    notes payable in the 2004 period as a result of a significant
    portion of our capital lease obligations becoming paid in full
    during the 2004 period.                                                                                                                                                                        





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | From inception of this agreement through December 31, 2004,
    and during the year ended December 31, 2004, we have
    purchased $1,725,000 and $600,000, respectively, of VirRxs
    Series A Preferred Stock for cash. These purchases are
    recorded as research and development expense. We have agreed to
    purchase an additional $150,000 of this stock for cash on the
    first day of each quarter through January 1, 2006.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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, which would also terminate the requirement for us to
    make any additional stock purchases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Provided the collaboration and license agreement remains in
    place, we are required to make additional milestone stock
    purchases, either for cash or through the issuance of our common
    stock, upon the completion of Phase 1, Phase 2 and
    Phase 3 clinical trials involving technologies licensed
    under this agreement. We are required to make a
    $5.0 million cash milestone payment to VirRx, for which we
    receive no VirRx stock, upon approval by the FDA of a BLA for
    the first collaboration product based on these technologies. To
    the extent we have already made cash milestone payments, we may
    receive a credit of 50% of the Phase 2 clinical trial
    milestone payments and 25% of the Phase 3 clinical trial
    milestone payments against this $5.0 million cash milestone
    payment. The additional milestone stock purchases and cash
    payment are not anticipated to be required in the near future.
    We have an option to purchase all outstanding shares of VirRx at
    any time until March 2007.



|                                                                                                           |                                              |  |        |        |  
|---------------------------------------------------------------------------------------------------------- | -------------------------------------------- |  | ------ | ------ | -
|Total debt service payments due during the year ending
    December 31:                                    |                                              |  |        |       
|                                                                                                           | 2005                                         |  | $      | 1,100  |  
|                                                                                                           | 2006                                         |  |        | 950    |  
|                                                                                                           | 2007                                         |  |        | 850    |  
|                                                                                                           | 2008                                         |  |        | 676    |  
|                                                                                                           | 2009                                         |  |        | 675    |  
|                                                                                                           | Thereafter                                   |  |        | 10,155 |  
|                                                                                                           |                                              |  |       
|Total debt service payments                                                                                |                                              |  | 14,406 |       
|                                                                                                           | Less portion representing interest           |  |        | (5,932 | )
|                                                                                                           |                                              |  |       
|                                                                                                           | Total principal balance at December 31, 2004 |  | $      | 8,474  |  
|                                                                                                           |                                              |  |       
|Principal balance presented on the December 31, 2004
    balance sheet as liabilities in these categories: |                                              |  |        |       
|                                                                                                           | Current portion of notes payable             |  | $      | 573    |  
|                                                                                                           | Notes payable, net of current portion        |  |        | 7,901  |  
|                                                                                                           |                                              |  |       
|                                                                                                           | Total principal balance at December 31, 2004 |  | $      | 8,474  |  
|                                                                                                           |                                              |  |       



|                                                    |            |   |       |       | 
|--------------------------------------------------- | ---------- | - | ----- | ----- | 
|Year ending December 31, 2005                       |            | $ | 293   |      
|                                                    | 2006       |   |       | 242   | 
|                                                    | 2007       |   |       | 165   | 
|                                                    | 2008       |   |       | 149   | 
|                                                    | 2009       |   |       | 144   | 
|                                                    | Thereafter |   |       | 2,418 | 
|                                                    |            |   |      
|Total minimum lease payments under operating leases |            | $ | 3,411 |      
|                                                    |            |   |      

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Quarterly Results of Operations




|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |       |  |   |        |       |  |   |        |       | 
|------------------------------------------------------------- | -------------------------- | ---------------------------------------- | ------ | ----- | -------- | - | ------ | ------------- |  | - | ------------ | ----- |  | --------- | ------ | ----- | -------- | - | ------ | ------------- |  | - | ------------ | ----- |  | - | ------ | ----- |  | - | ------ | ----- | 
|                                                              |                            | Three Months Ended                       |       
|                                                              |                            |                                          |       
|                                                              |                            | March 31,                                |        |       | June 30, |   |        | September 30, |  |   | December 31, |       |  | March 31, |        |       | June 30, |   |        | September 30, |  |   | December 31, |      
|                                                              |                            | 2003                                     |        |       | 2003     |   |        | 2003          |  |   | 2003         |       |  | 2004      |        |       | 2004     |   |        | 2004          |  |   | 2004         |      
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |      
|                                                              |                            | (Unaudited)                              |       
|                                                              |                            | (In thousands, except per share amounts) |       
|Statement of Operations Data:                                 |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |       |  |   |        |       |  |   |        |      
|Contract services, grant and other revenue                    |                            | $                                        | 150    |       |          | $ | 143    |               |  | $ | 9            |       |  | $         | 2      |       |          | $ | 109    |               |  | $ | 273          |       |  | $ | 209    |       |  | $ | 1,217  |      
|Operating expenses:                                           |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |       |  |   |        |       |  |   |        |      
|                                                              | Research and development   |                                          |        | 4,342 |          |   |        | 2,957         |  |   |              | 3,572 |  |           |        | 4,102 |          |   |        | 4,295         |  |   |              | 5,948 |  |   |        | 5,734 |  |   |        | 4,497 | 
|                                                              | General and administrative |                                          |        | 1,387 |          |   |        | 1,808         |  |   |              | 1,404 |  |           |        | 1,503 |          |   |        | 1,444         |  |   |              | 2,147 |  |   |        | 1,710 |  |   |        | 1.296 | 
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |      
|Loss from operations                                          |                            |                                          | (5,579 | )     |          |   | (4,622 | )             |  |   | (4,967       | )     |  |           | (5,603 | )     |          |   | (5,630 | )             |  |   | (7,822       | )     |  |   | (7,235 | )     |  |   | (4,576 | )    
|Interest income (expense), net                                |                            |                                          | (108   | )     |          |   | 314    |               |  |   | 249          |       |  |           | (62    | )     |          |   | (67    | )             |  |   | (35          | )     |  |   | (55    | )     |  |   | (34    | )    
|Other income                                                  |                            |                                          | 248    |       |          |   | 254    |               |  |   | 292          |       |  |           | 258    |       |          |   | 250    |               |  |   | 306          |       |  |   | 269    |       |  |   | 242    |      
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |      
|Net loss                                                      |                            | $                                        | (5,439 | )     |          | $ | (4,054 | )             |  | $ | (4,426       | )     |  | $         | (5,407 | )     |          | $ | (5,447 | )             |  | $ | (7,551       | )     |  | $ | (7,021 | )     |  | $ | (4,368 | )    
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |      
|Basic and diluted net loss per share                          |                            | $                                        | (0.25  | )     |          | $ | (0.19  | )             |  | $ | (0.19        | )     |  | $         | (0.21  | )     |          | $ | (0.21  | )             |  | $ | (0.28        | )     |  | $ | (0.26  | )     |  | $ | (0.16  | )    
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |      
|Shares used in computing basic and diluted net loss per share |                            |                                          | 21,525 |       |          |   | 21,851 |               |  |   | 23,650       |       |  |           | 24,562 |       |          |   | 26,566 |               |  |   | 26,607       |       |  |   | 26,703 |       |  |   | 27,886 |      
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |       |          |   |        |               |  |   |              |      

Contractual Obligations




|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |       |  |  |   |        | 
|--------------------- |  | -------------- | ------ | -------- | ------- | - | ------ | ----------- |  | ------- | ---------- |  | --------- | ----- | ----- |  |  | - | ------ | 
|                      |  |                |        |          |         |   |        |             |  | More    |           
|                      |  |                |        | One Year |         |   | Two to |             |  | Four to |            |  | Than Five |      
|                      |  | Total          |        |          | or Less |   |        | Three Years |  |         | Five Years |  |           | Years |      
|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |      
|                      |  | (In thousands) |       
|Long-Term Debt        |  | $              | 14,406 |          |         | $ | 1,100  |             |  | $       | 1,799      |  |           | $     | 1,352 |  |  | $ | 10,155 | 
|Operating Leases      |  |                | 3,411  |          |         |   | 293    |             |  |         | 407        |  |           |       | 293   |  |  |   | 2,418  | 
|Employment Agreements |  |                | 823    |          |         |   | 520    |             |  |         | 303        |  |           |       |      |  |  |   |       | 
|Consulting Agreements |  |                | 1,327  |          |         |   | 575    |             |  |         | 402        |  |           |       | 350   |  |  |   |       | 
|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |      
|Total                 |  | $              | 19,967 |          |         | $ | 2,488  |             |  | $       | 2,911      |  |           | $     | 1,995 |  |  | $ | 12,573 | 
|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |      

Off-Balance Sheet Arrangements




40



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Risk Factors




| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to commercialize ADVEXIN® therapy in
    various markets for multiple indications, particularly for the
    treatment of head and neck cancer, our business will be
    harmed.





| |                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to comply with FDA 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.











| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | 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;    

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| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | 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.                            









| |                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



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| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | We have a history of operating losses, expect to incur
    significant additional operating losses and may never become
    profitable.







| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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
    approval of ADVEXIN therapy;                                                                                                          
|
| |  | higher than expected costs of developing the processes and
    systems to support FDA 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;                                                             

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| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | 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.





| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 gene
    therapy may result in governmental authorities imposing
    additional regulatory requirements or a negative public
    perception of our products.



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| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | 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.





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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.





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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.





47



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| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





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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.       



| |                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because the target patient populations for the primary
    indication of ADVEXIN therapy, our lead product candidate, are
    small, 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 revenues.





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| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;                 
|
| |  | substantial delay in FDA approval;                       
|
| |  | costs of litigation; and                                 
|
| |  | substantial monetary awards to plaintiffs.               

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| |                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Any acquisition we might make may be costly and difficult
    to integrate, may divert management resources or dilute
    stockholder value.



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| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | 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 expenses; and                                                       
|
| |  | possible dilution to our stockholders.                                                             





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Some of our insiders are parties to transactions with us
    that may cause conflicting obligations.







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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk










|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








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








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of disclosure controls and procedures.


Changes in internal control over financial reporting.


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Managements Annual Report on Internal Control over
Financial Reporting.











|         |                  
|-------- | -----------------
|Item 9B. | Other Information

Not applicable.





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



54



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##### Table of Contents



Equity Compensation Plan Information


|                                                             |  |                  |       |  |              |              |           |                      |  |  |       | 
|------------------------------------------------------------ |  | ---------------- | ----- |  | ------------ | ------------ | --------- | -------------------- |  |  | ----- | 
|                                                             |  |                  |       |  |              | (c)Number of |          
|                                                             |  |                  |       |  |              | Securities   |          
|                                                             |  | (a)Number of     |       |  |              |              | Remaining |                     
|                                                             |  | Securities to be |       |  | (b)Weighted- |              |           | Available for        | 
|                                                             |  | Issued upon      |       |  | Average      |              |           | Future Issuance      | 
|                                                             |  | Exercise of      |       |  | Exercise     |              |           | under Equity         | 
|                                                             |  | Outstanding      |       |  | Price of     |              |           | Compensation         | 
|                                                             |  | Options,         |       |  | Outstanding  |              |           | Plans (Excluding     | 
|                                                             |  | Warrants         |       |  | Options,     |              |           | Securities Reflected | 
|                                                             |  | and Rights       |       |  | Warrants and |              |           | in Column (a))       | 
|Plan Category                                                |  | (In thousands)   |       |  | Rights       |              |           | (In thousands)       | 
|                                                             |  |                  |       |  |              |              |           |                      | 
|Equity compensation plans approved by security holders(1)(2) |  |                  | 5,559 |  |              | $            | 3.65      |                      |  |  | 1,851 | 
|Equity compensation plans not approved by security holders   |  |                  |      |  |              |              |          |                      |  |  |      | 
|                                                             |  |                  |       |  |              |              |           |                      | 
|Total                                                        |  |                  | 5,559 |  |              | $            | 3.65      |                      |  |  | 1,851 | 
|                                                             |  |                  |       |  |              |              |           |                      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The shares authorized under our 2000 Stock Option Plan are
    subject to an annual increase each January 1 of the lesser of
    (i) 1,600,000 shares, (ii) 5% of the outstanding
    shares of common stock on such date, or (iii) a lesser
    amount determined by the Board.                                                                                                                                                                                                                             
|   
|(2) | The shares authorized under our 2000 Employee Stock Purchase
    Plan are subject to an annual increase each January 1 of the
    lesser of (i) 480,000 shares, (ii) 1.5% of the
    outstanding shares of common stock on such date, or (iii) a
    lesser amount determined by the Board. There have been no common
    stock purchases under the 2000 Employee Stock Purchase Plan
    since June 30, 2001 and we have suspended operation of the
    plan until further notice by the Board of Directors.






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services



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PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules



|   |                                  
|-- | ---------------------------------
|1. | Consolidated Financial Statements



|                                                            |  |      |     | 
|----------------------------------------------------------- |  | ---- | --- | 
|                                                            |  | Page |    
|                                                            |  |      |    
|Report of Independent Registered Public
    Accounting Firm |  |      | F-1 | 
|Report of Independent Registered Public
    Accounting Firm |  |      | F-2 | 
|Consolidated Balance Sheets                                 |  |      | F-3 | 
|Consolidated Statements of Operations                       |  |      | F-4 | 
|Consolidated Statements of
    Stockholders Equity         |  |      | F-5 | 
|Consolidated Statements of Cash Flows                       |  |      | F-6 | 
|Notes to Consolidated Financial
    Statements              |  |      | F-7 | 



|   |                              
|-- | -----------------------------
|2. | Financial Statement Schedules





|   |         
|-- | --------
|3. | Exhibits

Exhibits


|        |    |           |  |   |                         |                                                                                                                                 
|------- | -- | --------- |  | - | ----------------------- | --------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |           |  |   |                        
|Number  |    |           |  |   | Description of Document
|        |    |           |  |   |                        
|        | 3  | .1(a)(6)  |  |  |                         | Certificate of Incorporation as currently in effect                                                                             
|        | 3  | .1(b)(6)  |  |  |                         | Amendment to Certificate of Incorporation, effective as of
    December 21, 2001                                                
|        | 3  | .1(c)(13) |  |  |                         | Amendment to Certificate of Incorporation, effective as of
    August 6, 2004                                                   
|        | 3  | .2(4)     |  |  |                         | Bylaws of Introgen as currently in effect                                                                                       
|        | 4  | .1(2)     |  |  |                         | Specimen Common Stock Certificate                                                                                               
|        | 4  | .2(5)     |  |  |                         | Certificate of Designations of Series A Non-Voting
    Convertible Preferred Stock                                              
|        | 4  | .3(9)     |  |  |                         | Form of Stock Purchase Warrant                                                                                                  
|        | 10 | .1(1)     |  |  |                         | Form of Indemnification Agreement between Introgen and each of
    its directors and officers                                   
|        | 10 | .2(1)*    |  |  |                         | 1995 Stock Plan and form of stock option agreement thereunder                                                                   
|        | 10 | .3(3)*    |  |  |                         | 2000 Stock Option Plan and forms of stock option agreement
    thereunder                                                       
|        | 10 | .3(14)*   |  |  |                         | 2000 Stock Option Plan form of stock option agreement, as amended                                                               
|        | 10 | .4(3)*    |  |  |                         | 2000 Employee Stock Purchase Plan and forms of agreements
    thereunder                                                        
|        | 10 | .5(1)     |  |  |                         | Form of Series C Preferred Stock Purchase Agreement among
    Introgen and certain investors                                    
|        | 10 | .6(1)     |  |  |                         | Registration Rights Agreement, dated October 31, 1997                                                                           
|        | 10 | .7(a)(1)  |  |  |                         | Assignment of Leases, dated November 23, 1998, by TMX
    Realty Corporation and Riverway Bank, and other related
    agreements
|        | 10 | .7(b)(1)  |  |  |                         | Lease Agreement, dated June 7, 1996, by and between
    Introgen and Plaza del Oro Business Center                              
|        | 10 | .7(c)(2)  |  |  |                         | Amendment No. 1 to Lease Agreement, effective as of
    May 9, 1997                                                             
|        | 10 | .7(d)(2)  |  |  |                         | Amendment No. 2 to Lease Agreement, effective as of
    July 31, 1998                                                           
|        | 10 | .7(e)(2)  |  |  |                         | Amendment No. 3 to Lease Agreement, effective as of
    June 29, 2000                                                           

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|        |    |             |  |   |                         |                                                                                                                                                                                                     
|------- | -- | ----------- |  | - | ----------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             |  |   |                        
|Number  |    |             |  |   | Description of Document
|        |    |             |  |   |                        
|        | 10 | .7(f)(13)   |  |  |                         | Modification Agreement effective April 1, 2004 by TMX
    Realty Corporation and Texas State Bank (formerly known as
    RiverwayBank), and other related agreements                                
|        | 10 | .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
    Introgen
|        | 10 | .8(b)(1)   |  |  |                         | Amendment No. 1 to Patent License Agreement, effective as
    of September 1, 1996                                                                                                                  
|        | 10 | .9(3)      |  |  |                         | Sponsored Research Agreement for Clinical Trial, No. CS 93-27,
    dated February 11, 1993, between Introgen and M. D.
    Anderson, as amended                                                     
|        | 10 | .10         |  |  |                         | Reserved                                                                                                                                                                                            
|        | 10 | .11(3)     |  |  |                         | Sponsored Research Agreement No. SR 93-04, dated
    February 11, 1993 between M. D. Anderson and Introgen, as
    amended                                                                          
|        | 10 | .12         |  |  |                         | Reserved                                                                                                                                                                                            
|        | 10 | .13(3)     |  |  |                         | Sponsored Research Agreement No. SR 96-004 between Introgen and
    M. D. Anderson, dated January 17, 1996                                                                                          
|        | 10 | .14         |  |  |                         | Reserved                                                                                                                                                                                            
|        | 10 | .15(3)     |  |  |                         | License Agreement, dated March 29, 1996 between Introgen
    and SKCC                                                                                                                               
|        | 10 | .16(1)      |  |  |                         | Consulting Agreement between Introgen and Jack A. Roth, M. D.,
    effective as of October 1, 1994                                                                                                  
|        | 10 | .17(1)      |  |  |                         | Consulting Agreement between EJ Financial Enterprises, Inc. and
    Introgen, effective as of July 1, 1994                                                                                          
|        | 10 | .18(d)(15)* |  |  |                         | Employment Agreement dated as of August 1, 2003 between
    Introgen and David G. Nance                                                                                                             
|        | 10 | .19(1)      |  |  |                         | Service Agreement, effective as of July 1, 1994, between
    Introgen and Domecq Technologies, Inc.                                                                                                 
|        | 10 | .20(a)(1)  |  |  |                         | Collaboration Agreement (p53 Products), effective as of
    October 7, 1994, between Introgen and RPR, as amended                                                                                   
|        | 10 | .20(b)(3)  |  |  |                         | Addendum No. 1 to Collaboration Agreement (p53 Products),
    dated January 23, 1996, between Introgen and RPR                                                                                      
|        | 10 | .20(c)(1)  |  |  |                         | 1997 Agreement Memorandum, effective as of July 22, 1997,
    between Introgen and RPR                                                                                                              
|        | 10 | .20(d)(3)  |  |  |                         | Letter Agreement, dated April 19, 1999, from Introgen to
    RPR regarding manufacturing process for ADVEXIN therapy                                                                                
|        | 10 | .21(a)(1)  |  |  |                         | Collaboration Agreement (K-ras Products), effective as of
    October 7, 1994, between Introgen and RPR, as amended                                                                                 
|        | 10 | .21(b)(1)   |  |  |                         | Amendment No. 1 to Collaboration Agreement (K-ras
    Products), effective as of September 27, 1995, between
    Introgen and RPR                                                                   
|        | 10 | .22(3)     |  |  |                         | Collaborative Research and Development Agreement dated
    October 30, 1998 between Introgen, RPR and NCI                                                                                           
|        | 10 | .23(1)     |  |  |                         | Non-Exclusive License Agreement, effective as of April 16,
    1997, by Introgen and Iowa Research Foundation                                                                                       
|        | 10 | .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 ICRT                                                                                                                         
|        | 10 | .26(3)     |  |  |                         | Exclusive License Agreement, effective as of July 19, 1999,
    by Introgen and Corixa Corporation                                                                                                  
|        | 10 | .27(a)      |  |  |                         | Reserved                                                                                                                                                                                            
|        | 10 | .27(b)(1)   |  |  |                         | Letter dated January 28, 2000, from Introgen to LXR
    Biotechnology (LXR), notifying LXR of its exercise
    of its option                                                                      
|        | 10 | .27(c)(2)  |  |  |                         | Exclusive License Agreement, effective as of May 16, 2000,
    by and between Introgen and LXR                                                                                                      

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|        |    |          |  |   |                         |                                                                                                                                                                              
|------- | -- | -------- |  | - | ----------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |          |  |   |                        
|Number  |    |          |  |   | Description of Document
|        |    |          |  |   |                        
|        | 10 | .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 Health                                              
|        | 10 | .33      |  |  |                         | Reserved                                                                                                                                                                     
|        | 10 | .34(2)   |  |  |                         | Master Lease Agreement, effective as of August 4, 1999, by
    and between Introgen and Finova Capital Corporation                                                           
|        | 10 | .35(2)   |  |  |                         | Construction Loan Agreement, effective as of July 24, 2000,
    by and between Introgen and Compass Bank                                                                     
|        | 10 | .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 Aventis                                                                          
|        | 10 | .38(5)   |  |  |                         | K-ras Assignment Agreement, effective as of June 30, 2001,
    by and among Introgen, API and Aventis                                                                        
|        | 10 | .39(5)   |  |  |                         | Registration Rights Agreement, effective as of June 30,
    2001, by and among Introgen, API and RPR                                                                         
|        | 10 | .40(5)   |  |  |                         | Voting Agreement, effective as of June 30, 2001, by and
    among Introgen, API and RPR                                                                                      
|        | 10 | .41(7)  |  |  |                         | Master Services Agreement, effective as of July 9, 2001, by
    and between Introgen and PPD Development, LLC                                                                
|        | 10 | .42(8) |  |  |                         | Series A Preferred Stock Purchase Agreement, effective as
    of March 7, 2002, by and between Introgen and VirRx, Inc.                                                      
|        | 10 | .43(8) |  |  |                         | Collaboration and License Agreement, effective as of
    March 7, 2002, by and between Introgen and VirRx, Inc.                                                              
|        | 10 | .44(9)   |  |  |                         | Securities Purchase Agreement, effective as of June 18,
    2003, by and among Introgen and the Investors named therein.                                                     
|        | 10 | .45(10)  |  |  |                         | Placement Agent Agreement, effective as of November 26,
    2003, by and among Introgen, SG Cowen Securities Corporation and
    First Albany Capital Inc.                   
|        | 10 | .46(11)  |  |  |                         | Placement Agent Agreement, dated December 6, 2004, by and
    between Introgen Therapeutics, Inc. and Mulier Capital Limited.                                                
|        | 14 | .1(12)   |  |  |                         | Code of Conduct and Ethics                                                                                                                                                   
|        | 21 | .1       |  |  |                         | List of subsidiaries of Introgen                                                                                                                                             
|        | 23 | .1       |  |  |                         | Consent of Independent Registered Public Accounting Firm                                                                                                                     
|        | 24 | .1       |  |  |                         | Power of Attorney (See page 60)                                                                                                                                              
|        | 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 amended        
|        | 32 | .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 Introgens Registration Statement on Form S-1
    (No. 333-30582) filed with the Securities and Exchange
    Commission on February 17, 2000.

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|    |                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 2 to Introgens Registration
    Statement on Form S-1 (No. 333-30582) filed with the
    Securities and Exchange Commission on September 8, 2000.                                                                
|   
|(3) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 3 to Introgens Registration
    Statement on Form S-1 (No. 333-30582) filed with the
    Securities and Exchange Commission on October 4, 2000.                                                                  
|   
|(4) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Quarterly Report on Form 10-Q, for the
    quarter ended December 31, 2000, (File No. 000-21291),
    filed with the Securities and Exchange Commission on
    February 14, 2001.                                    
|   
|(5) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Annual Report on Form 10-K for the
    fiscal year ended June 30, 2001 (File No. 000-21291),
    filed with the Securities and Exchange Commission on
    September 19, 2001.                                        
|   
|(6) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Transition Report on Form 10-KT for
    the six-month transition period ended December 31, 2001
    (File No. 000-21291), filed with the Securities and
    Exchange Commission on March 20, 2002.                   
|   
|(7) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 1 to Introgens Transition Report
    on Form 10-KT for the six-month transition period ended
    December 31, 2001 (File No. 000-21291), filed with the
    Securities and Exchange Commission on March 26, 2002.
|   
|(8) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Quarterly Report on Form 10-Q, for the
    quarter ended March 31, 2002 (File No. 000-21291),
    filed with the Securities and Exchange Commission on
    May 15, 2002.                                             
|   
|(9) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Current Report on Form 8-K, filed with
    the Securities and Exchange Commission on June 18, 2003.                                                                                                                  



|     |                                                                                                                                                                                                                                                                    
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Current Report on Form 8-K, filed with
    the Securities and Exchange Commission on November 26, 2003.                                                                           
|    
|(11) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Current Report on Form 8-K, filed with
    the Securities and Exchange Commission on December 10, 2004.                                                                           
|    
|(12) | See Access to Company Information, p. 1 of this
    Annual Report on Form 10-K.                                                                                                                                                                                  
|    
|(13) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Quarterly Report on Form 10-Q, for the
    quarter ended June 30, 2004 (File No. 000-21291),
    filed with the Securities and Exchange Commission on
    August 16, 2004.        
|    
|(14) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Quarterly Report on Form 10-Q, for the
    quarter ended September 30, 2004 (File No. 000-21291),
    filed with the Securities and Exchange Commission on
    November 15, 2004. 
|    
|(15) | Incorporated by reference to the same-numbered exhibit filed
    with Introgens Amendment No. 1 on Form 10-K/ A
    for the fiscal year ended December 31, 2003 (File
    No. 000-21291), filed with the Securities and Exchange
    Commission on April 29, 2004.



| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | 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.

Exhibits




Financial Statement Schedules




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SIGNATURES




| |  |                             |  |                                                                                                
| |  | --------------------------- |  | -----------------------------------------------------------------------------------------------
| |  | Introgen Therapeutics, Inc.
|
| |  | By:                         |  | /s/ David G. Nance                                                                             
| |  |                             |  |                                                                                                
| |  |                             |  | David G. NancePresident, Chief Executive Officer and Director
    (Principal Executive Officer)
|
| |  | By:                         |  | /s/ James W.
    Albrecht, Jr.                                                                 
| |  |                             |  |                                                                                                
| |  |                             |  | James W. Albrecht, Jr.Chief Financial Officer
    (Principal Financial and Accounting Officer) 



POWER OF ATTORNEY






|                                                                       |  |                                                                                    |  |                |  | 
|---------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                                              |  | Title                                                                              |  | Date          
|                                                                       |  |                                                                                    |  |               
|                                                                      
|/s/ David G. Nance(David
    G. Nance)                                 |  | President, Chief Executive Officer, and Director (Principal
    Executive Officer) |  | March 15, 2005
|                                                                      
|/s/ James W.
    Albrecht, Jr.(James
    W. Albrecht, Jr.)             |  | Chief Financial Officer (Principal Financial and Accounting
    Officer)           |  | March 15, 2005
|                                                                      
|/s/ John N.
    Kapoor, Ph.D.(John
    N. Kapoor, Ph.D.)               |  | Chairman of the Board and Director                                                 |  | March 15, 2005
|                                                                      
|/s/ William H.
    Cunningham, Ph.D.(William
    H. Cunningham, Ph.D.) |  | Director                                                                           |  | March 15, 2005
|                                                                      
|/s/ Malcolm
    Gillis, Ph.D.(Malcolm
    Gillis, Ph.D.)               |  | Director                                                                           |  | March 15, 2005

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|                                             |  |          |  |                |  | 
|-------------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                                    |  | Title    |  | Date          
|                                             |  |          |  |               
|                                            
|/s/ Charles E. Long(Charles
    E. Long)     |  | Director |  | March 15, 2005
|                                            
|/s/ Peter Barton Hutt(Peter
    Barton Hutt) |  | Director |  | March 15, 2005

61



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















| |                          
| | -------------------------
| | /s/
    Ernst & Young LLP







F-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                          
| | -------------------------
| | /s/
    Ernst & Young LLP







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INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


(Amounts in thousands)


|                                                                                                |                                                                                                                                                  |                                                         |       |         |        |  |       |          |        | 
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------- | ----- | ------- | ------ |  | ----- | -------- | ------ | 
|                                                                                                |                                                                                                                                                  | December 31,                                            |      
|                                                                                                |                                                                                                                                                  |                                                         |      
|                                                                                                |                                                                                                                                                  | 2003                                                    |       |         | 2004   | 
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|ASSETS                                                                                         
|Current Assets:                                                                                 |                                                                                                                                                  |                                                         |       |         |        |  |       |         
|                                                                                                | Cash and cash equivalents                                                                                                                        |                                                         | $     | 36,397  |        |  | $     | 30,187   |       
|                                                                                                | Short term investments                                                                                                                           |                                                         |       |        |        |  |       | 7,993    |       
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total cash, cash equivalents and short term investments |       |         | 36,397 |  |       |          | 38,180 | 
|                                                                                                | Prepaid expenses and other current assets                                                                                                        |                                                         |       | 302     |        |  |       | 659      |       
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total current assets                                    |       |         | 36,699 |  |       |          | 38,839 | 
|Property and equipment, net of accumulated depreciation of
    $9,661 and $10,983, respectively |                                                                                                                                                  |                                                         | 7,502 |         |        |  | 7,277 |         
|Grant rights acquired                                                                           |                                                                                                                                                  |                                                         |      |         |        |  | 1,582 |         
|Other assets                                                                                    |                                                                                                                                                  |                                                         | 282   |         |        |  | 359   |         
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total assets                                            |       | $       | 44,483 |  |       | $        | 48,057 | 
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                               
|LIABILITIES AND STOCKHOLDERS EQUITY                                                           
|Current Liabilities:                                                                            |                                                                                                                                                  |                                                         |       |         |        |  |       |         
|                                                                                                | Accounts payable                                                                                                                                 |                                                         | $     | 2,054   |        |  | $     | 2,683    |       
|                                                                                                | Accrued liabilities                                                                                                                              |                                                         |       | 2,535   |        |  |       | 3,572    |       
|                                                                                                | Deferred revenue                                                                                                                                 |                                                         |       | 16      |        |  |       | 30       |       
|                                                                                                | Current portion of notes payable and capital lease obligations                                                                                   |                                                         |       | 1,003   |        |  |       | 573      |       
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total current liabilities                               |       |         | 5,608  |  |       |          | 6,858  | 
|Notes payable, net of current portion                                                           |                                                                                                                                                  |                                                         | 6,714 |         |        |  | 7,901 |         
|Deferred revenue, long-term                                                                     |                                                                                                                                                  |                                                         | 876   |         |        |  | 1,132 |         
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total liabilities                                       |       |         | 13,198 |  |       |          | 15,891 | 
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|Commitments and Contingencies (Note 9)                                                          |                                                                                                                                                  |                                                         |       |         |        |  |       |         
|Stockholders Equity:                                                                           |                                                                                                                                                  |                                                         |       |         |        |  |       |         
|                                                                                                | Series A non-voting convertible preferred stock,
    $.001 par value; 5,000 shares authorized;
    100 shares issued and outstanding             |                                                         |       | 1       |        |  |       | 1        |       
|                                                                                                | Common stock, $.001 par value; 100,000 shares
    authorized; 26,539 and 30,622 shares issued and outstanding
    in 2003 and 2004, respectively |                                                         |       | 27      |        |  |       | 30       |       
|                                                                                                | Additional paid-in capital                                                                                                                       |                                                         |       | 124,270 |        |  |       | 149,652  |       
|                                                                                                | Deferred compensation                                                                                                                            |                                                         |       | (44     | )      |  |       | (161     | )     
|                                                                                                | Accumulated deficit                                                                                                                              |                                                         |       | (92,969 | )      |  |       | (117,356 | )     
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total stockholders equity                              |       |         | 31,285 |  |       |          | 32,166 | 
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 
|                                                                                                |                                                                                                                                                  | Total liabilities and stockholders equity              |       | $       | 44,483 |  |       | $        | 48,057 | 
|                                                                                                |                                                                                                                                                  |                                                         |       |         |        | 



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INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


(Amounts in thousands, except


per share amounts)


|                                                              |                            |                                    |         |        |         |   |         |        |         |   |         |        |         |  
|------------------------------------------------------------- | -------------------------- | ---------------------------------- | ------- | ------ | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                                              |                            | Year Ended December 31,            |        
|                                                              |                            |                                    |        
|                                                              |                            | 2002                               |         |        | 2003    |   |         | 2004   |        
|                                                              |                            |                                    |         |        |         |   |         |        |        
|Contract services, grant and other revenue                    |                            | $                                  | 1,173   |        |         | $ | 304     |        |         | $ | 1,808   |       
|Operating costs and expenses:                                 |                            |                                    |         |        |         |   |         |        |         |   |         |       
|                                                              | Research and development   |                                    |         | 21,512 |         |   |         | 14,973 |         |   |         | 20,474 |        
|                                                              | General and administrative |                                    |         | 6,722  |         |   |         | 6,102  |         |   |         | 6,597  |        
|                                                              |                            |                                    |         |        |         |   |         |        |        
|                                                              |                            | Total operating costs and expenses |         |        | 28,234  |   |         |        | 21,075  |   |         |        | 27,071  |  
|                                                              |                            |                                    |         |        |         |   |         |        |        
|Loss from operations                                          |                            |                                    | (27,061 | )      |         |   | (20,771 | )      |         |   | (25,263 | )     
|Interest income                                               |                            |                                    | 596     |        |         |   | 1,017   |        |         |   | 309     |       
|Interest expense                                              |                            |                                    | (803    | )      |         |   | (624    | )      |         |   | (500    | )     
|Other income                                                  |                            |                                    | 1,140   |        |         |   | 1,052   |        |         |   | 1,067   |       
|                                                              |                            |                                    |         |        |         |   |         |        |        
|                                                              |                            | Net loss                           |         | $      | (26,128 | ) |         | $      | (19,326 | ) |         | $      | (24,387 | )
|                                                              |                            |                                    |         |        |         |   |         |        |        
|Net loss per share, basic and diluted                         |                            | $                                  | (1.22   | )      |         | $ | (0.84   | )      |         | $ | (0.91   | )     
|                                                              |                            |                                    |         |        |         |   |         |        |        
|Shares used in computing basic and diluted net loss per share |                            |                                    | 21,471  |        |         |   | 22,902  |        |         |   | 26,943  |       
|                                                              |                            |                                    |         |        |         |   |         |        |        



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INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


(Amounts in thousands)


|                                                                                                           |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |   |  |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | --------------- | --- |  | ------------ | - | - | ---------- |  |  | -------- |  |  | ----------- | -- |  | ------------ | - | ------- | ------- |  | - | ------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                                                           |  | Series A Non-   |     |  |              |   |   |            |  |  |          |  |  |             |   
|                                                                                                           |  | Voting          |     |  |              |   |   |            |  |  |          |  |  |             |   
|                                                                                                           |  | Convertible     |     |  |              |   |   |            |  |  |          |  | 
|                                                                                                           |  | Preferred Stock |     |  | Common Stock |   |   | Additional |  |  |          |  |  |             |   
|                                                                                                           |  |                 |     |  |              |   |   | Paid-In    |  |  | Deferred |  |  | Accumulated |    |  |             
|                                                                                                           |  | Shares          |     |  | Amount       |   |   | Shares     |  |  | Amount   |  |  | Capital     |    |  | Compensation |   |         | Deficit |  |   | Total  |  
|                                                                                                           |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |  
|Balance, December 31, 2001                                                                                 |  |                 | 100 |  |              | $ | 1 |            |  |  | 21,446   |  |  | $           | 21 |  |              | $ | 94,544  |         |  | $ | (2,485 | ) |  | $ | (47,515  | ) |  | $ | 44,566  |  
|Issuance of common stock in connection with exercise of stock
    options and warrants                     |  |                 |    |  |              |   |  |            |  |  | 41       |  |  |             |   |  |              |   | 21      |         |  |   |       |   |  |   |         |   |  |   | 21      |  
|Addition to deferred compensation relating to issuance of stock
    options, net of reversals              |  |                 |    |  |              |   |  |            |  |  |         |  |  |             |   |  |              |   | (135    | )       |  |   | 135    |   |  |   |         |   |  |   |        |  
|Amortization of deferred compensation and stock-based
    compensation                                     |  |                 |    |  |              |   |  |            |  |  |         |  |  |             |   |  |              |   |        |         |  |   | 1,376  |   |  |   |         |   |  |   | 1,376   |  
|Net loss                                                                                                   |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |   |  |   | (26,128  | ) |  |   | (26,128 | )
|                                                                                                           |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |  
|Balance, December 31, 2002                                                                                 |  |                 | 100 |  |              | $ | 1 |            |  |  | 21,487   |  |  | $           | 21 |  |              | $ | 94,430  |         |  | $ | (974   | ) |  | $ | (73,643  | ) |  | $ | 19,835  |  
|Issuance of common stock in a private equity offering in June
    2003, net of offering costs of $729      |  |                 |    |  |              |   |  |            |  |  | 2,000    |  |  |             | 3  |  |              |   | 10,769  |         |  |   |       |   |  |   |         |   |  |   | 10,772  |  
|Issuance of common stock in a direct equity offering in December
    2003, net of offering costs of $1,473 |  |                 |    |  |              |   |  |            |  |  | 2,859    |  |  |             | 3  |  |              |   | 18,540  |         |  |   |       |   |  |   |         |   |  |   | 18,543  |  
|Issuance of common stock in connection with exercise of stock
    options and warrants                     |  |                 |    |  |              |   |  |            |  |  | 193      |  |  |             |   |  |              |   | 98      |         |  |   |       |   |  |   |         |   |  |   | 98      |  
|Addition to deferred compensation relating to issuance of stock
    options, net of reversals              |  |                 |    |  |              |   |  |            |  |  |         |  |  |             |   |  |              |   | 433     |         |  |   | 39     |   |  |   |         |   |  |   | 472     |  
|Amortization of deferred compensation and stock-based
    compensation                                     |  |                 |    |  |              |   |  |            |  |  |         |  |  |             |   |  |              |   |        |         |  |   | 891    |   |  |   |         |   |  |   | 891     |  
|Net loss                                                                                                   |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |   |  |   | (19,326  | ) |  |   | (19,326 | )
|                                                                                                           |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |  
|Balance, December 31, 2003                                                                                 |  |                 | 100 |  |              | $ | 1 |            |  |  | 26,539   |  |  | $           | 27 |  |              | $ | 124,270 |         |  | $ | (44    | ) |  | $ | (92,969  | ) |  | $ | 31,285  |  
|Issuance of common stock in a direct equity offering in December
    2004, net of offering costs of $1,366 |  |                 |    |  |              |   |  |            |  |  | 3,451    |  |  |             | 3  |  |              |   | 22,891  |         |  |   |       |   |  |   |         |   |  |   | 22,894  |  
|Issuance of common stock in connection with exercise of stock
    options                                  |  |                 |    |  |              |   |  |            |  |  | 380      |  |  |             |   |  |              |   | 644     |         |  |   |       |   |  |   |         |   |  |   | 644     |  
|Issuance of common stock in connection with asset acquisition                                              |  |                 |    |  |              |   |  |            |  |  | 252      |  |  |             |   |  |              |   | 1,477   |         |  |   |       |   |  |   |         |   |  |   | 1,477   |  
|Addition to deferred compensation relating to issuance of stock
    options, net of reversals              |  |                 |    |  |              |   |  |            |  |  |         |  |  |             |   |  |              |   | 370     |         |  |   | (297   | ) |  |   |         |   |  |   | 73      |  
|Amortization of deferred compensation and stock-based
    compensation                                     |  |                 |    |  |              |   |  |            |  |  |         |  |  |             |   |  |              |   |        |         |  |   | 180    |   |  |   |         |   |  |   | 180     |  
|Net loss                                                                                                   |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |   |  |   | (24,387  | ) |  |   | (24,387 | )
|                                                                                                           |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |  
|Balance, December 31, 2004                                                                                 |  |                 | 100 |  |              | $ | 1 |            |  |  | 30,622   |  |  | $           | 30 |  |              | $ | 149,652 |         |  | $ | (161   | ) |  | $ | (117,356 | ) |  | $ | 32,166  |  
|                                                                                                           |  |                 |     |  |              |   |   |            |  |  |          |  |  |             |    |  |              |   |         |         |  |   |        |  



F-5



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts in thousands)


|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |       |         |        |         |       |         |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | --------------------------------------------------- | ------- | ----- | ------- | ------ | ------- | ----- | ------- | ------ | ------- | ----- | ------- | -
|                                                                            |                                                                                 | Year Ended December 31,               |                                                    
|                                                                            |                                                                                 |                                       |                                                    
|                                                                            |                                                                                 | 2002                                  |                                                     |         | 2003  |         |        | 2004    |      
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|Cash flows from operating activities:                                       |                                                                                 |                                       |                                                     |         |       |         |        |         |       |         |        |        
|                                                                            | Net loss                                                                        |                                       | $                                                   | (26,128 | )     |         | $      | (19,326 | )     |         | $      | (24,387 | )    
|                                                                            | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                       |                                                     |         |       |         |        |         |       |         |        |         |      
|                                                                            |                                                                                 | Depreciation                          |                                                     |         | 1,801 |         |        |         | 1,475 |         |        |         | 1,322 |        
|                                                                            |                                                                                 | Compensation related to stock options |                                                     |         | 1,511 |         |        |         | 1,362 |         |        |         | 253   |        
|                                                                            |                                                                                 | Amortization of grant rights acquired |                                                     |         |      |         |        |         |      |         |        |         | 159   |        
|                                                                            |                                                                                 | Changes in assets and liabilities:    |                                                     |         |       |         |        |         |       |         |        |         |       |        
|                                                                            |                                                                                 |                                       | Decrease (increase) in other assets                 |         |       | 49      |        |         |       | 523     |        |         |       | (532    | )
|                                                                            |                                                                                 |                                       | Increase (decrease) in accounts payable             |         |       | 829     |        |         |       | 280     |        |         |       | 629     |  
|                                                                            |                                                                                 |                                       | Increase (decrease) in accrued liabilities          |         |       | (2,032  | )      |         |       | 538     |        |         |       | 773     |  
|                                                                            |                                                                                 |                                       | Increase (decrease) in deferred revenue             |         |       | 326     |        |         |       | 204     |        |         |       | 270     |  
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net cash used in operating activities               |         |       | (23,644 | )      |         |       | (14,944 | )      |         |       | (21,513 | )
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|Cash flows from investing activities:                                       |                                                                                 |                                       |                                                     |         |       |         |        |         |       |         |        |        
|                                                                            | Purchases of property and equipment                                             |                                       |                                                     | (121    | )     |         |        | (233    | )     |         |        | (1,097  | )    
|                                                                            | Purchases of short-term investments                                             |                                       |                                                     | (71,734 | )     |         |        |        |       |         |        | (38,383 | )    
|                                                                            | Maturities of short-term investments                                            |                                       |                                                     | 83,184  |       |         |        |        |       |         |        | 30,390  |      
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net cash provided by (used in) investing activities |         |       | 11,329  |        |         |       | (233    | )      |         |       | (9,090  | )
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|Cash flows from financing activities:                                       |                                                                                 |                                       |                                                     |         |       |         |        |         |       |         |        |        
|                                                                            | Proceeds from sale of preferred and common stock, net of
    offering costs     |                                       |                                                     | (114    | )     |         |        | 29,413  |       |         |        | 23,538  |      
|                                                                            | Proceeds from notes payable                                                     |                                       |                                                     |        |       |         |        | 314     |       |         |        | 1,448   |      
|                                                                            | Principal payments under capital lease obligations and notes
    payable        |                                       |                                                     | (1,501  | )     |         |        | (1,620  | )     |         |        | (593    | )    
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net cash provided by (used in) financing activities |         |       | (1,615  | )      |         |       | 28,107  |        |         |       | 24,393  |  
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net increase (decrease) in cash                     |         |       | (13,930 | )      |         |       | 12,930  |        |         |       | (6,210  | )
|Cash and cash equivalents, beginning of period                              |                                                                                 |                                       | 37,397                                              |         |       |         | 23,467 |         |       |         | 36,397 |        
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|Cash and cash equivalents, end of period                                    |                                                                                 | $                                     | 23,467                                              |         |       | $       | 36,397 |         |       | $       | 30,187 |        
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|Supplemental disclosure of cash flow information:                           |                                                                                 |                                       |                                                     |         |       |         |        |         |       |         |        |        
|                                                                            |                                                                                 |                                       | Cash paid for interest                              |         | $     | 803     |        |         | $     | 624     |        |         | $     | 472     |  
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|Supplemental disclosure of non-cash investing and financing
    activities: |                                                                                 |                                       |                                                     |         |       |         |        |         |       |         |        |        
|                                                                            | Grant rights acquired in asset acquisition                                      |                                       | $                                                   |        |       |         | $      |        |       |         | $      | (1,741  | )    
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            | Common stock issued for the asset acquisition                                   |                                       | $                                                   |        |       |         | $      |        |       |         | $      | 1,477   |      
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            | Liabilities assumed in asset acquisition                                        |                                       | $                                                   |        |       |         | $      |        |       |         | $      | 272     |      
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            | Proceeds from equipment notes                                                   |                                       | $                                                   |        |       |         | $      | 314     |       |         | $      | 560     |      
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      
|                                                                            | Proceeds from insurance financing notes                                         |                                       | $                                                   |        |       |         | $      |        |       |         | $      | 123     |      
|                                                                            |                                                                                 |                                       |                                                     |         |       |         |        |         |      



F-6



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2004




|   |                                      
|-- | -------------------------------------
|1. | Formation and Business of the Company

















F-7



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##### 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





| |                       
| | ----------------------
| | Property and Equipment





|                              |                              |              |        |        |      |   |         |        | 
|----------------------------- | ---------------------------- | ------------ | ------ | ------ | ---- | - | ------- | ------ | 
|                              |                              | December 31, |       
|                              |                              |              |       
|                              |                              | 2003         |        |        | 2004 |  
|                              |                              |              |        |        |      |  
|Facilities                    |                              | $            | 11,570 |        |      | $ | 12,415  |       
|Equipment                     |                              |              | 5,593  |        |      |   | 5,845   |       
|                              |                              |              |        |        |      |  
|                              | Total property and equipment |              |        | 17,163 |      |   |         | 18,260 | 
|Less accumulated depreciation |                              |              | (9,661 | )      |      |   | (10,983 | )     
|                              |                              |              |        |        |      |  
|                              | Net property and equipment   |              | $      | 7,502  |      |   | $       | 7,277  | 
|                              |                              |              |        |        |      |  

F-8



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                     
| | --------------------
| | Federal Income Taxes





| |                    
| | -------------------
| | Accrued Liabilities



|                                         |                           |              |     |       |      |   |     |       | 
|---------------------------------------- | ------------------------- | ------------ | --- | ----- | ---- | - | --- | ----- | 
|                                         |                           | December 31, |    
|                                         |                           |              |    
|                                         |                           | 2003         |     |       | 2004 |  
|                                         |                           |              |     |       |      |  
|Clinical costs due unrelated parties     |                           | $            | 434 |       |      | $ | 803 |      
|Clinical costs due affiliate             |                           |              | 100 |       |      |   |    |      
|Pre-clinical costs due related parties   |                           |              | 208 |       |      |   | 631 |      
|Pre-clinical costs due unrelated parties |                           |              | 246 |       |      |   | 138 |      
|Property taxes                           |                           |              | 468 |       |      |   | 421 |      
|Franchise and use taxes                  |                           |              | 141 |       |      |   | 219 |      
|Payroll                                  |                           |              | 328 |       |      |   | 64  |      
|Vacation                                 |                           |              | 246 |       |      |   | 249 |      
|Legal and accounting fees                |                           |              | 309 |       |      |   | 549 |      
|Other vendor charges not yet billed      |                           |              | 55  |       |      |   | 498 |      
|                                         |                           |              |     |       |      |  
|                                         | Total accrued liabilities |              | $   | 2,535 |      |   | $   | 3,572 | 
|                                         |                           |              |     |       |      |  



F-9



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                    
| | -------------------
| | Revenue Recognition









| |                               
| | ------------------------------
| | Research and Development Costs





| |                   
| | ------------------
| | Net Loss Per Share





| |                         
| | ------------------------
| | Stock-Based Compensation





F-10



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                                                                    |                                 |                         |         |       |      |   |         |       |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ----------------------- | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                                                                    |                                 | Year Ended December 31, |        
|                                                                                                                    |                                 |                         |        
|                                                                                                                    |                                 | 2002                    |         |       | 2003 |   |         | 2004  |  
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|Net loss, as reported                                                                                               |                                 | $                       | (26,128 | )     |      | $ | (19,326 | )     |   | $ | (24,387 | )    
|Add: Stock-based employee compensation expense included in
    reported net loss                                    |                                 | $                       | 1,377   |       |      | $ | 1,362   |       |   | $ | 253     |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards |                                 | $                       | (1,902  | )     |      | $ | (4,076  | )     |   | $ | (2,878  | )    
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|Pro forma net loss                                                                                                  |                                 | $                       | (26,653 | )     |      | $ | (22,040 | )     |   | $ | (27,012 | )    
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|Loss per share:                                                                                                     |                                 |                         |         |       |      |   |         |       |   |   |         |      
|                                                                                                                    | Basic and Diluted  as reported |                         | $       | (1.22 | )    |   | $       | (0.84 | ) |   | $       | (0.91 | )
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|                                                                                                                    | Basic and Diluted  pro forma   |                         | $       | (1.24 | )    |   | $       | (0.96 | ) |   | $       | (1.00 | )
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  





| |                         
| | ------------------------
| | Other Comprehensive Loss





|   |                                               
|-- | ----------------------------------------------
|3. | Acquisition of Magnum Therapeutics Corporation





F-11



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                          |  |   |       | 
|------------------------- |  | - | ----- | 
|Cash and cash equivalents |  | $ | 9     | 
|Acquired grant rights     |  | $ | 1,741 | 



|   |                  
|-- | -----------------
|4. | Intangible Assets



| |                                      
| | -------------------------------------
| | Intangible Assets With Definite Lives



|                                                     |  |              |       |  |              |   |      |          |  |       |          |  |  |              |     |  |          |   |   |  |  |   |   | 
|---------------------------------------------------- |  | ------------ | ----- |  | ------------ | - | ---- | -------- |  | ----- | -------- |  |  | ------------ | --- |  | -------- | - | - |  |  | - | - | 
|                                                     |  | December 31, |      
|                                                     |  |              |      
|                                                     |  | 2004         |       |  | 2003         |  
|                                                     |  |              |       |  |              |  
|                                                     |  | Gross        |       |  |              |   | Net  |          |  | Gross |          |  |  |              | Net | 
|                                                     |  | Carrying     |       |  | Accumulated  |   |      | Carrying |  |       | Carrying |  |  | Accumulated  |     |  | Carrying |  
|                                                     |  | Amount       |       |  | Amortization |   |      | Amount   |  |       | Amount   |  |  | Amortization |     |  | Amount   |  
|                                                     |  |              |       |  |              |   |      |          |  |       |          |  |  |              |     |  |          |  
|Asset Acquisition:                                   |  |              |       |  |              |   |      |          |  |       |          |  |  |              |     |  |          |   |   |  |  |   |   | 
|Acquired Grant Rights (22 month amortization period) |  | $            | 1,741 |  |              | $ | (159 | )        |  | $     | 1,582    |  |  | $            | 0   |  |          | $ | 0 |  |  | $ | 0 | 
|                                                     |  |              |       |  |              |   |      |          |  |       |          |  |  |              |     |  |          |  
|Ending Balance                                       |  | $            | 1,741 |  |              | $ | (159 | )        |  | $     | 1,582    |  |  | $            | 0   |  |          | $ | 0 |  |  | $ | 0 | 
|                                                     |  |              |       |  |              |   |      |          |  |       |          |  |  |              |     |  |          |  







|   |                     
|-- | --------------------
|5. | Stockholders Equity



| |            
| | -----------
| | Stock Sales





F-12



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                    
| | ---------------------------------------------------
| | Series A Non-Voting Convertible Preferred
    Stock





| |                   
| | ------------------
| | Stock Option Plans







F-13



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|                                 |           |             |           |           |                |   |      |      | 
|-------------------------------- | --------- | ----------- | --------- | --------- | -------------- | - | ---- | ---- | 
|                                 |           |             |           | Weighted  |               
|                                 |           |             |           | Average   |               
|                                 |           | Options     |           |           | Exercise Price |  
|                                 |           | Outstanding |           |           | per Share      |  
|                                 |           |             |           |           |                |  
|Balance, December 31, 2001       |           |             | 3,261,796 |           |                | $ | 1.80 |     
|                                 | Granted   |             |           | 989,514   |                |   |      | 3.62 | 
|                                 | Exercised |             |           | (40,331   | )              |   |      | 0.54 | 
|                                 | Cancelled |             |           | (224,886  | )              |   |      | 3.46 | 
|                                 |           |             |           |           |                |  
|Balance, December 31, 2002       |           |             | 3,986,093 |           |                |   | 2.18 |     
|                                 | Granted   |             |           | 1,269,890 |                |   |      | 4.91 | 
|                                 | Exercised |             |           | (193,488  | )              |   |      | 1.46 | 
|                                 | Cancelled |             |           | (306,094  | )              |   |      | 3.20 | 
|                                 |           |             |           |           |                |  
|Balance, December 31, 2003       |           |             | 4,756,401 |           |                |   | 2.91 |     
|                                 | Granted   |             |           | 1,472,551 |                |   |      | 6.03 | 
|                                 | Exercised |             |           | (380,294  | )              |   |      | 1.72 | 
|                                 | Cancelled |             |           | (290,384  | )              |   |      | 6.02 | 
|                                 |           |             |           |           |                |  
|Balance, December 31, 2004       |           |             | 5,558,274 |           |                |   | 3.65 |     
|                                 |           |             |           |           |                |  
|Exercisable at December 31, 2004 |           |             | 3,496,401 |           |                |   | 2.63 |     
|                                 |           |             |           |           |                |  





F-14



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|               |  |                     |           |                  |                     |  |      |                  |  |                   |              |  |  |                  |           |  |  |   |      | 
|-------------- |  | ------------------- | --------- | ---------------- | ------------------- |  | ---- | ---------------- |  | ----------------- | ------------ |  |  | ---------------- | --------- |  |  | - | ---- | 
|               |  | Options Outstanding |           |                  | Options Exercisable | 
|               |  |                     |           |                  |                     | 
|               |  |                     |           | Weighted Average |                     |  |      |                  | 
|               |  | Outstanding as of   |           |                  | Remaining           |  |      |                  |  | Exercisable as of |              |  | 
|Range of       |  | December 31,        |           |                  | Contractual Life    |  |      | Weighted Average |  |                   | December 31, |  |  | Weighted Average |          
|Exercise Price |  | 2004                |           |                  | (In years)          |  |      | Exercise Price   |  |                   | 2004         |  |  | Exercise Price   |          
|               |  |                     |           |                  |                     |  |      |                  |  |                   |              |  |  |                  |          
|$0.39-$0.52    |  |                     | 1,457,253 |                  |                     |  | 2.81 |                  |  | $                 | 0.48         |  |  |                  | 1,457,253 |  |  | $ | 0.48 | 
|$1.25-$4.64    |  |                     | 1,506,738 |                  |                     |  | 6.98 |                  |  |                   | 3.31         |  |  |                  | 1,133,438 |  |  |   | 3.27 | 
|$4.65-$5.00    |  |                     | 1,188,495 |                  |                     |  | 7.91 |                  |  |                   | 4.94         |  |  |                  | 725,021   |  |  |   | 4.93 | 
|$5.11-$9.65    |  |                     | 1,405,788 |                  |                     |  | 9.19 |                  |  |                   | 6.21         |  |  |                  | 180,689   |  |  |   | 6.73 | 
|               |  |                     |           |                  |                     |  |      |                  |  |                   |              |  |  |                  |          
|               |  |                     | 5,558,274 |                  |                     |  | 6.65 |                  |  |                   | 3.65         |  |  |                  | 3,496,401 |  |  |   | 2.63 | 
|               |  |                     |           |                  |                     |  |      |                  |  |                   |              |  |  |                  |          



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan





| |                                    
| | -----------------------------------
| | Shares Reserved For Future Issuance





|   |                     
|-- | --------------------
|6. | Federal Income Taxes



F-15



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                       |                    |                                                             |         |   |        |   |         |   |        |  
|------------------------------------------------------ | ------------------ | ----------------------------------------------------------- | ------- | - | ------ | - | ------- | - | ------ | -
|                                                       |                    | 2003                                                        |         |   | 2004   |  
|                                                       |                    |                                                             |         |   |        |  
|Deferred tax assets:                                   |                    |                                                             |         |   |        |   |         |  
|                                                       |                    | Net operating loss carryforwards                            |         | $ | 28,330 |   |         | $ | 33,261 |  
|                                                       |                    | Research and development tax credits                        |         |   | 848    |   |         |   | 1,448  |  
|                                                       |                    | Orphan drug tax credits                                     |         |   |       |   |         |   | 7,908  |  
|                                                       |                    | Tax basis of property and equipment in excess of book basis |         |   | 1,979  |   |         |   | 2,477  |  
|                                                       |                    | Stock compensation                                          |         |   |       |   |         |   | 1,662  |  
|                                                       |                    | Accrued liabilities                                         |         |   | 216    |   |         |   | 601    |  
|                                                       |                    | Deferred rent                                               |         |   | 325    |   |         |   | 419    |  
|                                                       |                    | Other                                                       |         |   | 55     |   |         |   | 33     |  
|                                                       |                    |                                                             |         |   |        |  
|Total deferred tax assets                              |                    |                                                             | 31,753  |   |        |   | 47,809  |  
|                                                       |                    |                                                             |         |   |        |  
|Deferred tax liabilities:                              |                    |                                                             |         |   |        |   |         |  
|                                                       |                    | Prepaid expenses                                            |         |   | (66    | ) |         |   | (89    | )
|                                                       |                    | Acquired grant rights                                       |         |   |       |   |         |   | (585   | )
|                                                       |                    |                                                             |         |   |        |  
|Total deferred tax liabilities                         |                    |                                                             | (66     | ) |        |   | (674    | )
|                                                       |                    |                                                             |         |   |        |  
|Net deferred tax assets                                |                    |                                                             | 31,687  |   |        |   | 47,135  |  
|Less  Valuation allowance for net deferred tax assets |                    |                                                             | (31,687 | ) |        |   | (47,135 | )
|                                                       |                    |                                                             |         |   |        |  
|                                                       | Net deferred taxes |                                                             | $       |  |        |   | $       |  |       
|                                                       |                    |                                                             |         |   |        |  





F-16



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                             |  |                         |       |    |      |  |       |      |  |  |       |   
|-------------------------------------------- |  | ----------------------- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | --
|                                             |  | Year Ended December 31, |      
|                                             |  |                         |      
|                                             |  | 2002                    |       |    | 2003 |  |       | 2004 | 
|                                             |  |                         |       |    |      |  |       |      | 
|Federal statutory rate                       |  |                         | (34.0 | )% |      |  | (34.0 | )%   |  |  | (34.0 | )%
|State taxes, net of federal benefit          |  |                         | (2.8  | )  |      |  | (2.8  | )    |  |  | (2.6  | ) 
|Increase in deferred tax valuation allowance |  |                         | 37.1  |    |      |  | 39.5  |      |  |  | 66.0  |   
|Stock option compensation                    |  |                         | 1.8   |    |      |  | 2.4   |      |  |  | (7.4  | ) 
|Orphan drug tax credits                      |  |                         |      |    |      |  |      |      |  |  | (20.9 | ) 
|Research and development tax credits         |  |                         | (0.2  | )  |      |  | (2.9  | )    |  |  | (2.5  | ) 
|Other                                        |  |                         | (1.9  | )  |      |  | (2.2  | )    |  |  | 1.4   |   
|                                             |  |                         |       |    |      |  |       |      | 
|                                             |  |                         |      | %  |      |  |      | %    |  |  |      | % 
|                                             |  |                         |       |    |      |  |       |      | 



|   |              
|-- | -------------
|7. | Notes Payable









F-17



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |            |       |     |       |       | 
|----------------------------- | ---------- | ----- | --- | ----- | ----- | 
|Year ending December 31, 2005 |            | $     | 573 |      
|                              | 2006       |       |     | 456   |      
|                              | 2007       |       |     | 395   |      
|                              | 2008       |       |     | 243   |      
|                              | 2009       |       |     | 257   |      
|                              | Thereafter |       |     | 6,550 |      
|                              |            |       |    
|                              |            | Total |     | $     | 8,474 | 
|                              |            |       |    





|   |                                
|-- | -------------------------------
|8. | License and Research Agreements



| |                                                                                
| | -------------------------------------------------------------------------------
| | Patent and Technology License Agreement With The
    University of Texas System





| |            
| | -----------
| | VirRx, Inc.









F-18



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                               
| | ----------------------------------------------
| | Other Technology Option and License Agreements





|   |                              
|-- | -----------------------------
|9. | Commitments and Contingencies



| |                  
| | -----------------
| | Lease Commitments



|                              |            |                              |     |       |       | 
|----------------------------- | ---------- | ---------------------------- | --- | ----- | ----- | 
|                              |            | Operating                    |    
|                              |            | Leases                       |    
|                              |            |                              |    
|Year ending December 31, 2005 |            | $                            | 293 |      
|                              | 2006       |                              |     | 242   |      
|                              | 2007       |                              |     | 165   |      
|                              | 2008       |                              |     | 149   |      
|                              | 2009       |                              |     | 144   |      
|                              | Thereafter |                              |     | 2,418 |      
|                              |            |                              |    
|                              |            | Total minimum lease payments |     | $     | 3,411 | 
|                              |            |                              |    



| |                         
| | ------------------------
| | Insurance and Litigation





| |                     
| | --------------------
| | Employment Agreement





|    |                
|--- | ---------------
|10. | Related Parties



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














F-20



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##### Table of Contents



EXHIBIT INDEX


|        |    |    |  |                         |  |                                                                                                                                                                              
|------- | -- | -- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |  |                        
|Number  |    |    |  | Description of Document
|        |    |    |  |                        
|        | 21 | .1 |  |                        |  | List of subsidiaries of Introgen                                                                                                                                             
|        | 23 | .1 |  |                        |  | Consent of Independent Registered Public Accounting Firm                                                                                                                     
|       
|        | 24 | .1 |  |                        |  | Power of Attorney (See page 60)                                                                                                                                              
|       
|        | 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 amended        
|       
|        | 32 | .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

F-21