##### 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, 2005.                                                
|          
|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 per share


o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2




|                           |                      |                         
|-------------------------- | -------------------- | ------------------------
|Large accelerated filer  o | Accelerated filer  þ | Non-accelerated filer  o

12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


10-K










---



##### 










INTROGEN THERAPEUTICS, INC.


ANNUAL REPORT ON
FORM 10-K


TABLE OF CONTENTS


|                                                        |  |                                                                                                                      |  |   
|------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | --
|PART I                                                 
|Item 1.                                                 |  | Business                                                                                                             |  | 1 
|Item 1A.                                                |  | Risk Factors                                                                                                         |  | 27
|Item 1B.                                                |  | Unresolved Staff Comments                                                                                            |  | 40
|Item 2.                                                 |  | Properties                                                                                                           |  | 40
|Item 3.                                                 |  | Legal Proceedings                                                                                                    |  | 41
|Item 4.                                                 |  | Submission of Matters to a Vote of Security
    Holders                                                              |  | 41
|PART II                                                
|Item 5.                                                 |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  | 41
|Item 6.                                                 |  | Selected Financial Data                                                                                              |  | 42
|Item 7.                                                 |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  | 43
|Item 7A.                                                |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |  | 58
|Item 8.                                                 |  | Financial Statements and Supplementary
    Data                                                                      |  | 58
|Item 9.                                                 |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  | 58
|Item 9A.                                                |  | Controls and Procedures                                                                                              |  | 58
|Item 9B.                                                |  | Other Information                                                                                                    |  | 59
|PART III                                               
|Item 10.                                                |  | Directors and Executive Officers of the
    Registrant                                                               |  | 59
|Item 11.                                                |  | Executive Compensation                                                                                               |  | 59
|Item 12.                                                |  | Security Ownership of Certain Beneficial
    Owners and Management                                                   |  | 59
|Item 13.                                                |  | Certain Relationships and Related
    Transactions                                                                   |  | 59
|Item 14.                                                |  | Principal Accounting Fees and Services                                                                               |  | 60
|PART IV                                                
|Item 15.                                                |  | Exhibits and Financial Statement
    Schedules                                                                       |  | 60
|Signatures                                              |  | 65                                                                                                                  
|Oral Healthcare Alliance Agreement                     
|Common Stock Purchase Agreement                        
|List of Subsidiaries                                   
|Cosent of Independent Registered Public Accounting Firm
|Certification of CEO & CFO Pursuant to Rule 13a-(a)    
|Certification of CEO & CFO Pursuant to Section 906     





---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

This Annual Report on
Form 10-K contains
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended
(Securities Act) and Section 21E of the Securities Exchange
Act of 1934, as amended (Exchange Act). These statements
include, among others, statements concerning our future
operations, financial condition and prospects, and our business
strategies as well as the statements below under
Item 1A. Risk Factors. 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 in
Item 1A. Risk Factors and elsewhere in, or
incorporated by reference into, this Annual Report on
Form 10-K.


Access to Company Information


10-K, 10-Q, 8-K 10-K.




Overview




in vivo




1



---



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| |                     
| | --------------------
| | ADVEXIN®
    therapy

®




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We have received Fast Track designation for ADVEXIN therapy from
    the FDA under its protocol assessment program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | We have submitted a Submission of a Partial Application (SOPA)
    Request to the FDA Division of Cell and Gene Therapy proposing a
    rolling Biologics License Application (BLA) for ADVEXIN
    therapy for the treatment of recurrent head and neck cancer. We
    have proposed to the FDA that the rolling BLA could be evaluated
    under the provisions of Subpart H for Accelerated Approval.                                                                                                                                                                                                                                                                                                                                         
|
| |  | We have reviewed historically successful FDA registration
    strategies for numerous cancer drugs, noting that during the
    past seven years, approximately 14 cancer drugs were initially
    approved based upon submissions of Phase 2 clinical data. A
    number of the Phase 2 trials supporting these approvals
    employed single-arm studies involving relatively small patient
    populations. Virtually all of those drugs relied on surrogate
    endpoints for approval and a substantial number of the products
    were for orphan drug indications.                                                                                                                                                                         
|
| |  | Our two ongoing Phase 3 clinical trials of ADVEXIN therapy
    in patients with recurrent squamous cell cancer of the head and
    neck are multi-national, multi-site trials. In connection with
    these trials, the FDA has suggested we consider interim
    Phase 3 efficacy analyses. We are discussing with the FDA a
    plan to conduct these analyses in support of the ADVEXIN
    registration process. In addition, we have requested that the
    FDA allow us to accelerate the initiation of a previously
    approved interim safety analysis for one of our ongoing
    Phase 3 trials.                                                                                                                                       
|
| |  | ADVEXIN therapy for head and neck cancer has been designated an
    Orphan Drug under the Orphan Drug Act. This designation may give
    us up to seven years of marketing exclusivity for ADVEXIN
    therapy for this indication if approved by the FDA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | We have enrolled over 500 patients in ADVEXIN therapy
    clinical trials, establishing a large safety database that
    indicates an absence of treatment-limiting side effects
    frequently associated with many other cancer therapies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | We have tested ADVEXIN therapy used alone and in combination
    with radiation therapy, chemotherapy, and surgery in various
    clinical trials.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | We have observed that the anti-cancer effects of ADVEXIN therapy
    are a result of multiple mechanisms of action including
    induction of tumor cell death, suppression of tumor growth and
    the inhibition of tumor blood vessels, known as
    anti-angiogenesis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Based upon defining prognostic, medical and biological
    characteristics that represent refined targeting of ADVEXIN
    therapy, we have identified subpopulations of patients
    participating in certain of our Phase 2 clinical trials for
    recurrent squamous cell cancer of the head and neck who may
    particularly benefit from ADVEXIN therapy. Analysis of the data
    from these patient subpopulations showed that up to 29% of the
    patients experienced objective responses with either complete
    tumor regression or a reduction of tumor size greater than or
    equal to 50% of the pre-treatment size. We are in the process of
    filing for patent protection covering certain of these
    characteristics.
|
| |  | In the combined analysis of the three multi-national, multi-site
    Phase 2 clinical trials involving 217 patients with
    recurrent squamous cell carcinoma of the head and neck, the
    overall tumor growth control rate was 59%. Tumor growth control
    rate represents the percentage of treated tumors where there was
    disappearance of the tumor, shrinkage of the tumor or the
    absence of additional tumor                                                                                                                                                                                                                                                                                                                  

2



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | growth beyond 25% of pre-treatment measurements. In 10% of the
    treated lesions, there was either complete tumor regression or a
    reduction of tumor size greater than or equal to 50% of the
    pre-treatment size.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | We performed a Phase 2 clinical trial of ADVEXIN therapy
    combined with neoadjuvant chemotherapy and surgery in women with
    locally advanced breast cancer. Data from this clinical trial
    indicated that objective clinical responses were seen following
    the combined therapy in all of the patients. Complete tumor
    removal by subsequent surgery was achieved in 100% of the
    patients. After at least 35 months of follow-up, 92% of the
    treated patients were alive and 83% had survived without
    evidence of disease recurrence.                                                                                                                                                                                                       
|
| |  | We performed a Phase 2 clinical trial of ADVEXIN therapy
    administered as a complement to radiation therapy in non-small
    cell lung cancer. In the 19 patients who participated in
    the trial, combined ADVEXIN and radiation treatment resulted in
    63% biopsy-proven complete responses at three months, which is
    approximately four times the expected rate using radiotherapy
    alone.                                                                                                                                                                                                                                                                                                                                                             
|
| |  | We performed a Phase 1/early Phase 2 clinical trial of
    ADVEXIN therapy for the treatment of advanced, unresectable,
    squamous cell esophageal cancer. Results of this trial in
    patients with esophageal cancer refractory to chemotherapy and
    radiation indicate three of the ten patients treated, or 30%,
    had negative biopsies after receiving ADVEXIN therapy. The
    median survival of the patients treated with ADVEXIN therapy was
    approximately twelve months, which compared favorably to
    historical controls in which a median survival of less than ten
    months was observed for patients who did not respond to standard
    treatments. Six patients, or 60%, were still alive one year
    after beginning ADVEXIN therapy.
|
| |  | Our clinical trials indicate ADVEXIN therapy is well tolerated
    as a monotherapy and well tolerated when combined with
    conventional cancer therapies. We have observed that the
    addition of ADVEXIN therapy to standard chemotherapy, surgery or
    radiation can increase the activity of these conventional
    therapies without increasing the severity of side effects
    normally associated with these standard treatment regimens.                                                                                                                                                                                                                                                                                                                  
|
| |  | We hold the worldwide rights for the development, manufacturing,
    marketing and commercialization of ADVEXIN therapy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | We hold or control over 80 issued methods or composition patents
    related to ADVEXIN therapy and its production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| |         
| | --------
| | INGN 241





| |         
| | --------
| | INGN 225



3



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##### Table of Contents







| |         
| | --------
| | INGN 234





| |         
| | --------
| | INGN 401

FUS-1 FUS-1




| |         
| | --------
| | INGN 402





| |         
| | --------
| | INGN 403

DNA and Cell
Biology.




| |         
| | --------
| | INGN 007







Background




| |                      
| | ---------------------
| | Targeted Therapeutics



4



---



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







| |                      
| | ---------------------
| | An Overview of Cancer







5



---



##### Table of Contents







| |                  
| | -----------------
| | Tumor Suppressors

FUS-1






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







6



---



##### Table of Contents



The Introgen Approach








The Introgen Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Develop and Commercialize ADVEXIN therapy, INGN 225 and INGN
    241 for Multiple Cancer Indications. We plan to continue our
    development programs to commercialize our ADVEXIN therapy using
    the p53 tumor suppressor and our INGN 241 product using the
    mda-7 tumor suppressor, also know as interleukin 24 (IL-24), in
    multiple cancer indications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Develop Our Portfolio of Targeted Molecular Therapies and
    Other Drug Products. Utilizing our significant research,
    clinical, regulatory and manufacturing expertise, we are
    evaluating development of additional molecular therapies for
    various cancers, such as INGN 225, a highly specific cancer
    immunotherapy, INGN 234, an oral rinse or mouthwash formulation
    containing the p53 tumor suppressor, INGN 401, using the
    FUS-1 tumor suppressor,
    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 pre-clinical and clinical studies with these new
    nanoparticle drugs have demonstrated a good safety profile and
    promising anti-cancer activity. In addition to
    FUS-1, we incorporate
    the p53 tumor suppressor and the mda-7 tumor suppressor in these
    nanoparticle formulations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Develop the Topical Use of Tumor Suppressors. We plan to
    continue developing topical product candidates for the treatment
    or prevention of oral and dermal cancers. We believe these
    treatments are a logical extension of our loco-regional delivery
    of cancer therapies and represent attractive product candidates
    since pre-malignant and malignant cells can be exposed to
    natural, biological tumor suppressors and DNA repairing agents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Establish Targeted Sales and Marketing Capabilities. The
    oncology market can be effectively addressed by a small, focused
    sales force because it is characterized by a concentration of
    specialists in relatively few major cancer centers. We believe
    we can address this market by a combination of building a direct
    sales force as part of the ADVEXIN therapy commercialization
    process and pursuing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

7



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | marketing and distribution agreements with corporate partners
    for ADVEXIN therapy as well as additional products.                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Expand Our Market Focus to Non-Cancer Indications. We
    plan to leverage our scientific, research and process
    competencies in molecular therapy and vector development to
    pursue targeted molecular therapies for a variety of other
    diseases and conditions. We believe these therapies could hold
    promise for diseases such as cardiovascular disease and
    rheumatoid arthritis, which, like cancer, result from cellular
    dysfunction or uncontrolled cell growth.

Product Development Programs




|                                               |  |                                                                 |  |                    |              | 
|---------------------------------------------- |  | --------------------------------------------------------------- |  | ------------------ | ------------ | 
|Product**                                      |  | Cancer Indication                                               |  | Development Status |             
|                                               |  |                                                                 |  |                    |             
|ADVEXIN Therapy (p53)                          |  | Head and Neck (both monotherapy and combined with chemotherapy) |  |                    | Phase 3      | 
|                                               |  | Non-Small Cell Lung(combined with radiation therapy)            |  |                    | Phase 2      | 
|                                               |  | Breast (combined with chemotherapy)                             |  |                    | Phase 1-2    | 
|                                               |  | Perioperative (and surgery)                                     |  |                    | Phase 1-2    | 
|                                               |  | Esophageal                                                      |  |                    | Phase 1-2    | 
|                                               |  | Prostate                                                        |  |                    | Phase 1*     | 
|                                               |  | Intravenous Administration                                      |  |                    | Phase 1*     | 
|                                               |  | Ovarian                                                         |  |                    | Phase 1*     | 
|                                               |  | Bladder                                                         |  |                    | Phase 1*     | 
|                                               |  | Bronchoalveolar                                                 |  |                    | Phase 1*     | 
|                                               |  | Brain (glioblastoma)                                            |  |                    | Phase 1*     | 
|INGN 225 (p53 molecular immunotherapy)         |  | Small Cell Lung                                                 |  |                    | Phase 1-2    | 
|                                               |  | Breast                                                          |  |                    | Phase 1-2    | 
|INGN 234 (p53 topical)                         |  | Oral Cancer Prevention (mouthwash)                              |  |                    | Phase 1-2*   | 
|INGN 241 (mda-7)                               |  | Head and Neck (combined with radiation therapy)                 |  |                    | Phase 3      | 
|                                               |  | Melanoma                                                        |  |                    | Phase 1-2    | 
|                                               |  | Other solid tumors                                              |  |                    | 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.

8



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

®








®






9



---



##### Table of Contents











Clinical
Cancer Research.




10



---



##### Table of Contents







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

Clinical Cancer Research Proceedings of the
American Society for Clinical Oncology






Molecular
Cancer Therapeutics The Laryngoscope, Conquest






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



11



---



##### Table of Contents









®




in vivo






12



---



##### Table of Contents









Journal of Leukocyte Biology,
Cancer Gene Therapy, Cancer Research, Molecular Therapy,
Oncogene, Surgery, International
Immunopharmacolgy






| |                                       
| | --------------------------------------
| | INGN 225 (p53 molecular immunotherapy)

Current Opinion in
Drug Discovery & Development




Clinical Cancer Research.




13



---



##### Table of Contents







| |                       
| | ----------------------
| | INGN 234 (p53 topical)







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

FUS-1, FUS-1,






Cancer Gene Therapy Cancer Research.




| |                                                                                     
| | ------------------------------------------------------------------------------------
| | INGN 402 and INGN 403 (nanoparticle formulations of p53
    and mda-7, respectively)

DNA and Cell Biology.




| |                                               
| | ----------------------------------------------
| | INGN 007 (replication-competent viral therapy)



14



---



##### Table of Contents



Cancer Research


Other Research and Development Programs




FUS-1




Clinical Cancer Research Molecular Cancer Therapeutics.




Introgen Enabling Technologies






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



15



---



##### Table of Contents





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



DNA and Cell Biology




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





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





| |   |                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Multi-Molecule Vector System. This technology is designed
    to combine multiple therapeutic molecules with a vector. This
    approach has the potential for use with both viral and non-viral
    delivery systems to allow the activity of more than one
    molecular therapy at a time for disease treatment.                                                                 
|
| |  | Pro-Apoptotic Molecule Delivery System. This technology
    is designed to allow the activity of pro-apoptotic, or
    apoptosis-inducing, molecules during treatment only, while
    temporarily suppressing the ability of the apoptotic molecule to
    kill producer cells during production. This system could
    facilitate higher volume production of pro-apoptotic agents.
|
| |  | Tissue-Specific Targeting Systems. This technology is
    designed to promote the activity of the therapeutic molecule in
    only those cells which have been affected by the disease being
    targeted. It is intended to be applied to both viral and
    non-viral vectors.                                                                                                    

Manufacturing and Process Development


scale-up


state-of


16



---



##### Table of Contents





Business and Collaborative Arrangements




| |                                        
| | ---------------------------------------
| | Alliance with Colgate-Palmolive Company



FUS-1)






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









17



---



##### Table of Contents







| |              
| | -------------
| | SR Pharma plc



Academic and Other Collaborations






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







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



18



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##### Table of Contents





| |                                                                  
| | -----------------------------------------------------------------
| | Research and License Agreement for the mda-7 Tumor
    Suppressor





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



Research and Development Expense




Marketing and Sales




Patents and Intellectual Property




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





19



---



##### Table of Contents





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





| |                                                  
| | -------------------------------------------------
| | Combination Therapy with the p53 Tumor Suppressor

® ®




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





| |                        
| | -----------------------
| | Other Tumor Suppressors

(FUS-1)


20



---



##### Table of Contents





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





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





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



Government Regulation




| |                          
| | -------------------------
| | The Drug Approval Process





| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | Completion of preclinical laboratory and animal testing;                                                                        
|
| |  | Submission of an investigational new drug application, or IND,
    which must become effective before clinical trials may begin;

21



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##### Table of Contents





| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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







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



22



---



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











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





23



---



##### Table of Contents







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

New England Journal of Medicine,




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

Fast Track Designation.








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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-

24



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| |  |                                                                                                                                                                                                                                          
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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



---



##### Table of Contents







Human Resources






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



Jack A. Roth, M.D.


Carol L. Prives, Ph.D


Daniel D. Von Hoff, M.D.


Elizabeth Grimm, Ph.D


Michael J. Imperiale, Ph.D


26



---



##### Table of Contents






Item 1A.     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;    

27



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##### Table of Contents





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




28



---



##### Table of Contents



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;                                                             

29



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##### Table of Contents





| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | 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 do not continue to receive grant funding from federal
agencies and others, we may be unable to continue our research
and development programs for certain of our product candidates
at current levels or in the manner we have planned for the
future.




If we are not able to create effective collaborative
marketing relationships, we may be unable to market ADVEXIN
therapy successfully or in a cost-effective manner.




30



---



##### Table of Contents



Serious and unexpected side effects attributable to molecular
therapies may result in governmental authorities imposing
additional regulatory requirements or a negative public
perception of our products.










Patient enrollment may be slow and patients may discontinue
their participation in clinical studies, which may negatively
impact the results of these studies, and extend the timeline for
completion of our and our collaborators development
programs for our product candidates.






| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | the size of the patient population;                                          
|
| |  | the nature of the clinical protocol requirements;                            
|
| |  | the diversion of patients to other trials or marketed therapies;             
|
| |  | the ability to recruit and manage clinical centers and
    associated trials;
|
| |  | the proximity of patients to clinical sites; and                             
|
| |  | the patient eligibility criteria for the study.                              



31



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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.








32



---



##### Table of Contents









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.








33



---



##### Table of Contents







We may be subject to litigation and infringement claims that
may be costly, divert managements attention, and
materially harm our business.






If we fail to meet our obligations under license agreements,
we may lose our rights to key technologies on which our business
depends.




34



---



##### Table of Contents





Competition and technological change may make our product
candidates and technologies less attractive or obsolete.






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.       

35



---



##### Table of Contents



We must achieve significant market share and obtain high
per-patient prices for our products to achieve profitability.




If we are unable to manufacture our products in sufficient
quantities or obtain regulatory approvals for our manufacturing
facilities, or if our manufacturing process is found to infringe
a valid patented process or processes of another company, then
we may be unable to meet demand for our products and lose
potential revenue.








36



---



##### Table of Contents



scale-up




We rely on a limited number of suppliers for some of our
manufacturing materials. Any problems experienced by such
suppliers could negatively affect our operations.




If product liability lawsuits are successfully brought
against us, we may incur substantial damages and demand for our
product candidates may be reduced.






| |   |                                                          
| | - | ---------------------------------------------------------
| |  | decreased demand for our product candidates;             
|
| |  | injury to our reputation and significant media attention;
|
| |  | withdrawal of clinical trial volunteers;                 
|
| |  | substantial delay in FDA approval;                       
|
| |  | costs of litigation; and                                 
|
| |  | substantial monetary awards to plaintiffs.               



We use hazardous materials in our business, and any claims
relating to improper handling, storage or disposal of these
materials could harm our business.




37



---



##### Table of Contents





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.


10-K.


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






| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | potential exposure to unknown liabilities of acquired companies;                                   
|
| |  | the difficulty and expense of assimilating the operations and
    personnel of acquired businesses;
|
| |  | diversion of management time and attention and other resources;                                    
|
| |  | loss of key employees and customers as a result of changes in
    management;                      
|
| |  | the incurrence of amortization expense; and                                                        
|
| |  | possible dilution to our stockholders.                                                             



38



---



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If we lose key personnel or are unable to attract and retain
additional, highly skilled personnel required to develop our
products or obtain new collaborations, our business will
suffer.




Future changes in financial accounting standards or practices
or existing taxation rules or practices may cause adverse
unexpected financial reporting fluctuations and affect our
reported results of operations.




Our corporate governance structure, including provisions in
our certificate of incorporation and by-laws, and Delaware law,
may prevent a change in control or management that stockholders
may consider desirable.






39



---



##### Table of Contents



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








10-K.







Item 1B.     Unresolved
Staff Comments









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





40



---



##### Table of Contents














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










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

10-K.


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, 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 | 
|Fiscal Year Ended December 31, 2005: |                       |      |   |       |     |  |   |     
|                                     | First Fiscal Quarter  |      | $ | 8.60  |     |  | $ | 6.35 | 
|                                     | Second Fiscal Quarter |      |   | 8.10  |     |  |   | 6.07 | 
|                                     | Third Fiscal Quarter  |      |   | 7.40  |     |  |   | 4.90 | 
|                                     | Fourth Fiscal Quarter |      |   | 6.60  |     |  |   | 4.54 | 



41



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##### Table of Contents



Dividend Policy




Stock Repurchases


10-K.







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

10-K.


|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|------------------------------------------------------------- |  | --------------------------------------- | ------- | ---------- | ------------ | - | ------- | ----------------------- |  | - | ------- | - |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                                              |  |                                         |         | Six Months |              |   |         |                         |  |   |         |   |  |         |        
|                                                              |  | Year Ended                              |         |            | Ended        |   |         |                        
|                                                              |  | June 30,                                |         |            | December 31, |   |         | Year Ended December 31, | 
|                                                              |  |                                         |         |            |              |   |         |                         | 
|                                                              |  | 2001(b)                                 |         |            | 2001(b)      |   |         | 2001(c)                 |  |   | 2002(b) |   |  | 2003(a) |         |   | 2004(a) |   |         | 2005(a) | 
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|                                                              |  | (Unaudited)                             |        
|                                                              |  | (In thousands except per share amounts) |        
|Statement of Operations Data:                                 |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|Contract services, grants and other revenue                   |  | $                                       | 684     |            |              | $ | 298     |                         |  | $ | 591     |   |  | $       | 1,173   |   |         | $ | 304     |         |  | $ | 1,808   |   |  | $ | 1,867   |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Collaborative research and development revenue from affiliate |  |                                         | 3,016   |            |              |   |        |                         |  |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Product sales to affiliate                                    |  |                                         | 1,500   |            |              |   |        |                         |  |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|Cost of product sales                                         |  |                                         | 2,488   |            |              |   |        |                         |  |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Gross margin on product sales                                 |  |                                         | (988    | )          |              |   |        |                         |  |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |        |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Operating costs and expense:                                  |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|Research and development                                      |  |                                         | 15,014  |            |              |   | 10,063  |                         |  |   | 19,923  |   |  |         | 21,512  |   |         |   | 14,973  |         |  |   | 20,474  |   |  |   | 21,400  |  
|General and administrative                                    |  |                                         | 4,875   |            |              |   | 3,526   |                         |  |   | 6,361   |   |  |         | 6,722   |   |         |   | 6,102   |         |  |   | 6,597   |   |  |   | 7,834   |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Total operating costs and expense                             |  |                                         | 19,889  |            |              |   | 13,589  |                         |  |   | 26,284  |   |  |         | 28,234  |   |         |   | 21,075  |         |  |   | 27,071  |   |  |   | 29,234  |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Loss from operations                                          |  |                                         | (17,177 | )          |              |   | (13,291 | )                       |  |   | (25,693 | ) |  |         | (27,061 | ) |         |   | (20,771 | )       |  |   | (25,263 | ) |  |   | (27,367 | )
|Interest income (expense), net                                |  |                                         | 381     |            |              |   | 445     |                         |  |   | 423     |   |  |         | (207    | ) |         |   | 393     |         |  |   | (191    | ) |  |   | 166     |  
|Other income                                                  |  |                                         | 354     |            |              |   | 518     |                         |  |   | 871     |   |  |         | 1,140   |   |         |   | 1,052   |         |  |   | 1,067   |   |  |   | 1,098   |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Net loss                                                      |  | $                                       | (16,442 | )          |              | $ | (12,328 | )                       |  | $ | (24,399 | ) |  | $       | (26,128 | ) |         | $ | (19,326 | )       |  | $ | (24,387 | ) |  | $ | (26,103 | )
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Net loss per share, basic and diluted                         |  | $                                       | (1.02   | )          |              | $ | (0.58   | )                       |  | $ | (1.14   | ) |  | $       | (1.22   | ) |         | $ | (0.84   | )       |  | $ | (0.91   | ) |  | $ | (0.80   | )
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 
|Shares used in computing basic and diluted net loss per share |  |                                         | 16,163  |            |              |   | 21,440  |                         |  |   | 21,440  |   |  |         | 21,471  |   |         |   | 22,902  |         |  |   | 26,943  |   |  |   | 32,780  |  
|                                                              |  |                                         |         |            |              |   |         |                         |  |   |         |   |  |         |         |   |         |   |         |         | 

42



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|                                                   |  |              |         |   |         |   |         |         |  |   |         |   |  |         |          |   |  |   |          |  
|-------------------------------------------------- |  | ------------ | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | ------- | -------- | - |  | - | -------- | -
|                                                   |  | December 31, |        
|                                                   |  |              |        
|                                                   |  | 2001(b)      |         |   | 2002(b) |   |         | 2003(b) |  |   | 2004(a) |   |  | 2005(a) |         
|                                                   |  |              |         |   |         |   |         |         |  |   |         |   |  |         |         
|Balance Sheet Data:                                |  |              |         |   |         |   |         |         |  |   |         |   |  |         |          |   |  |   |          |  
|Cash, cash equivalents, and short-term investments |  | $            | 48,825  |   |         | $ | 23,467  |         |  | $ | 36,397  |   |  | $       | 38,180   |   |  | $ | 33,122   |  
|Working capital                                    |  |              | 43,175  |   |         |   | 18,852  |         |  |   | 31,091  |   |  |         | 31,981   |   |  |   | 29,529   |  
|Total assets                                       |  |              | 60,424  |   |         |   | 33,316  |         |  |   | 44,483  |   |  |         | 48,057   |   |  |   | 42,981   |  
|Notes payable, net of current portion              |  |              | 9,037   |   |         |   | 7,435   |         |  |   | 6,714   |   |  |         | 7,901    |   |  |   | 7,784    |  
|Deferred revenue, long-term                        |  |              | 361     |   |         |   | 619     |         |  |   | 876     |   |  |         | 1,132    |   |  |   | 1,404    |  
|Accumulated deficit                                |  |              | (47,515 | ) |         |   | (73,643 | )       |  |   | (92,969 | ) |  |         | (117,356 | ) |  |   | (143,459 | )
|Stockholders equity                               |  |              | 44,566  |   |         |   | 19,835  |         |  |   | 31,285  |   |  |         | 32,166   |   |  |   | 27,011   |  






|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The selected Consolidated Statement of Operations data for the
    years ended December 31, 2005, 2004 and 2003 and the
    Consolidated Balance Sheet data as of December 31, 2005 and
    2004, are derived from our and our subsidiaries audited
    Consolidated Financial Statements, which appear in Part IV
    of this Annual Report on
    Form 10-K.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The selected Consolidated Statement of Operations data for the
    year ended June 30, 2001, the six months ended
    December 31, 2001, the year ended December 31, 2002,
    and the Consolidated Balance Sheet data as of December 31,
    2003, 2002 and 2001, are derived from our and our
    subsidiaries audited Consolidated Financial Statements
    included in our Annual Reports on
    Form 10-K filed
    with the Commission on March 15, 2005 and March 5,
    2004.
|   
|(c) |  | The selected Consolidated Statement of Operations data for the
    year ended December 31, 2001 are derived from our and our
    subsidiaries unaudited Consolidated Financial Statements.                                                                                                                                                                                                                                                                                           






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

The following discussion and analysis should be read in
conjunction with our Condensed Consolidated Financial Statements
and the related notes thereto included in this Annual Report on
Form 10-K. The
discussion and analysis contains forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. These statements include
the statements under Item 1A. Risk Factors.
These forward-looking statements are based on our current
expectations and entail various risks and uncertainties. Our
actual results could differ materially from those projected in
the forward-looking statements as a result of various factors,
including those set forth under Item 1A. Risk
Factors.


Overview






43



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S-3, 333-107028).


S-3, 333-107799)


S-3, 333-107799)






| |                      
| | ---------------------
| | Mortgage Note Payable



44



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##### Table of Contents



225-month




| |                                               
| | ----------------------------------------------
| | Acquisition of Magnum Therapeutics Corporation









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



| |                                              
| | ---------------------------------------------
| | Conversion of Preferred Stock to Common Stock



S-3 333-129687)




45



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##### Table of Contents





| |                            
| | ---------------------------
| | Investment in SR Pharma plc





| |                      
| | ---------------------
| | London Stock Exchange





| |                
| | ---------------
| | Research Grants







Critical Accounting Policies


Use of Estimates.


Cash, Cash Equivalents and Short-term Investments. held-to


Marketable Securities.


Intangible Assets.


46



---



##### Table of Contents





Revenue Recognition.


Research and Development Costs.


Recently Issued Accounting Pronouncements






47



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##### Table of Contents





Results of Operations












| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                              
|
| |  | 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;   
|
| |  | 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;                             

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| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | If we cannot maintain our existing corporate and
    academic arrangements and enter into new arrangements, we may be
    unable to develop products effectively, or at all;      
|
| |  | If we are not able to create effective collaborative
    marketing relationships, we may be unable to market ADVEXIN
    therapy successfully or in a cost-effective manner; and  
|
| |  | Even if we receive regulatory approval to market our
    ADVEXIN therapy, INGN 241, INGN 225 or other product candidates,
    we may not be able to commercialize them profitably.



| |                                                         
| | --------------------------------------------------------
| | Comparison of Years Ended December 31, 2005 and
    2004





| |        
| | -------
| | Revenue

Contract Services, Grant and Other Revenue.




| |                  
| | -----------------
| | Costs and Expense

Research and Development.


|                                         |  |              |        |  |      |   |        | 
|---------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                         |  | Year Ended   |       
|                                         |  | December 31, |       
|                                         |  |              |       
|                                         |  | 2004         |        |  | 2005 |  
|                                         |  |              |        |  |      |  
|Pre-clinical stage programs expense      |  | $            | 2,632  |  |      | $ | 2,644  | 
|Clinical stage programs expense          |  |              | 14,822 |  |      |   | 15,713 | 
|General research and development expense |  |              | 3,020  |  |      |   | 3,043  | 
|                                         |  |              |        |  |      |  
|Total research and development expense   |  | $            | 20,474 |  |      | $ | 21,400 | 
|                                         |  |              |        |  |      |  





General and Administrative.


49



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Share-Based Compensation Expense.










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









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





| |        
| | -------
| | Revenue

Contract Services, Grant and Other Revenue.


50



---



##### Table of Contents







| |                  
| | -----------------
| | Costs and Expense

Research and Development.


|                                         |  |              |        |  |      |   |        | 
|---------------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                         |  | Year Ended   |       
|                                         |  | December 31, |       
|                                         |  |              |       
|                                         |  | 2003         |        |  | 2004 |  
|                                         |  |              |        |  |      |  
|Pre-clinical stage programs expense      |  | $            | 2,775  |  |      | $ | 2,632  | 
|Clinical stage programs expense          |  |              | 9,820  |  |      |   | 14,822 | 
|General research and development expense |  |              | 2,378  |  |      |   | 3,020  | 
|                                         |  |              |        |  |      |  
|Total research and development expense   |  | $            | 14,973 |  |      | $ | 20,474 | 
|                                         |  |              |        |  |      |  



General and Administrative.


Share-Based Compensation Expense.




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

51



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| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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







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 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); 
|
| |  | $19.6 million of equity sales, net of offering costs, to
    Colgate-Palmolive pursuant to an alliance agreement entered into
    in November 2005;               
|
| |  | $19.2 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                                                       
|
| |  | $5.7 million in leases and notes payable from commercial
    lessors and lenders to acquire equipment pledged as collateral
    for those leases and notes.       



52



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A larger net loss in the 2005 period compared to the 2004
    period; and                                                                                                                                                                                                                                                                                                                       
|
| |  | An aggregate decrease in accounts payable and accrued
    liabilities during the 2005 period compared to an aggregate
    increase in accounts payable and accrued liabilities during the
    2004 period due to variations in the timing of payments to
    vendors that is a function of the nature of vendors to whom we
    have obligations and variations in the terms of payment to them;





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Depreciation that increased in the 2005 period compared to the
    2004 period due to acquisitions of property and equipment during
    and subsequent to the 2004 period for which the first full year
    of depreciation was the 2005 period;                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Share-based compensation expense that increased in the 2005
    period compared to the 2004 period due to the issuance of shares
    to certain officers in connection with expiring stock options as
    discussed above under Item 7. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Comparison of the Year Ended
    December 31, 2005 and December 31, 2004 
    Share-Based Compensation Expense;                                                                                                                                             
|
| |  | An increase in amortization of grant rights acquired during the
    2005 period compared to the 2004 period since such amortization
    was recorded throughout 2005 but for only a portion of 2004
    because the rights being amortized arose in connection with our
    acquisition of Magnum in October 2004;                                                                                                                                                                                                                                                                                     
|
| |  | A decrease in other assets during the 2005 period compared to an
    increase in other assets during the 2004 period due to
    (1) a prepayment of certain expenses in the 2004 period
    that did not occur in the 2005 period and (2) a decrease in
    federal grant funding receivable during the 2005 period compared
    to an increase in federal grant funding receivable during the
    2004 period due to the receipt in the 2005 period of grant
    funding earned during that period whereas grant funding earned
    during the 2004 period was received in subsequent
    periods; and

53



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| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An increase in deferred revenue during the 2005 period that was
    greater than the increase during the 2004 period due to an
    increase in payments from third parties in advance of us
    performing work under agreements to provide manufacturing
    process development services for them.









| |   |                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A decrease in proceeds from sales of common stock to third
    parties and a lower level of stock option exercises in the 2005
    period compared to the 2004 period;                                                                                                        
|
| |  | A decrease in proceeds from notes payable in the 2005 period
    compared to the 2004 period as the 2004 period included proceeds
    received from an amendment of a mortgage note in that period,
    which is an event that did not occur again in the 2005
    period; and
|
| |  | An increase in principal payments under notes payable and
    capital leases in the 2005 period compared to the 2004 period
    due to additional borrowings subsequent to the 2004 period to
    finance equipment acquisitions.                                             





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | From inception of this agreement through December 31, 2005,
    and during the year ended December 31, 2005, we have
    purchased $2,325,000 and $600,000, respectively, of VirRxs
    Series A Preferred Stock for cash. These purchases are
    recorded as research and development expense. We purchased an
    additional $150,000 of this stock for cash on January 1,
    2006, which was our final scheduled quarterly purchase of such
    stock. We have no plans at this time to purchase additional
    shares of this stock except in the event of VirRxs
    achievement of prescribed milestones discussed below.                                                                                                                                                                                                                                            
|
| |  | VirRx is required to use the proceeds from these stock sales in
    accordance with the terms of a collaboration and license
    agreement between VirRx and us for the development of
    VirRxs technologies. We may unilaterally terminate this
    collaboration and license agreement with 90 days prior
    notice, 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, 2 and 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

54



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| |  |                                                                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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:                                    |                                              |  |        |       
|                                                                                                           | 2006                                         |  | $      | 1,293  |  
|                                                                                                           | 2007                                         |  |        | 1,102  |  
|                                                                                                           | 2008                                         |  |        | 777    |  
|                                                                                                           | 2009                                         |  |        | 675    |  
|                                                                                                           | 2010                                         |  |        | 670    |  
|                                                                                                           | Thereafter                                   |  |        | 9,486  |  
|                                                                                                           |                                              |  |       
|Total debt service payments                                                                                |                                              |  | 14,003 |       
|                                                                                                           | Less portion representing interest           |  |        | (5,463 | )
|                                                                                                           |                                              |  |       
|                                                                                                           | Total principal balance at December 31, 2005 |  | $      | 8,540  |  
|                                                                                                           |                                              |  |       
|Principal balance presented on the December 31, 2005
    balance sheet as liabilities in these categories: |                                              |  |        |       
|                                                                                                           | Current portion of notes payable             |  | $      | 756    |  
|                                                                                                           | Notes payable, net of current portion        |  |        | 7,784  |  
|                                                                                                           |                                              |  |       
|                                                                                                           | Total principal balance at December 31, 2005 |  | $      | 8,540  |  
|                                                                                                           |                                              |  |       



|                                                    |            |   |       |       | 
|--------------------------------------------------- | ---------- | - | ----- | ----- | 
|Year ending December 31, 2006                       |            | $ | 428   |      
|                                                    | 2007       |   |       | 344   | 
|                                                    | 2008       |   |       | 325   | 
|                                                    | 2009       |   |       | 225   | 
|                                                    | 2010       |   |       | 156   | 
|                                                    | Thereafter |   |       | 2,459 | 
|                                                    |            |   |      
|Total minimum lease payments under operating leases |            | $ | 3,937 |      
|                                                    |            |   |      





55



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56



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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, |      
|                                                              |                            | 2004                                     |        |       | 2004     |   |        | 2004          |  |   | 2004         |       |  | 2005      |        |        | 2005     |   |        | 2005          |  |   | 2005         |      
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |      
|                                                              |                            | (Unaudited)                              |       
|                                                              |                            | (In thousands, except per share amounts) |       
|Statement of Operations Data:                                 |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |       |  |   |        |       |  |   |        |      
|Contract services, grant and other revenue                    |                            | $                                        | 109    |       |          | $ | 273    |               |  | $ | 209          |       |  | $         | 1,217  |        |          | $ | 509    |               |  | $ | 336          |       |  | $ | 398    |       |  | $ | 624    |      
|Operating expense:                                            |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |       |  |   |        |       |  |   |        |      
|                                                              | Research and development   |                                          |        | 4,295 |          |   |        | 5,948         |  |   |              | 5,734 |  |           |        | 4,497  |          |   |        | 5,239         |  |   |              | 5,700 |  |   |        | 5,090 |  |   |        | 5,371 | 
|                                                              | General and administrative |                                          |        | 1,444 |          |   |        | 2,147         |  |   |              | 1,710 |  |           |        | 1,.296 |          |   |        | 1,810         |  |   |              | 2,006 |  |   |        | 1,657 |  |   |        | 2,361 | 
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |      
|Loss from operations                                          |                            |                                          | (5,630 | )     |          |   | (7,822 | )             |  |   | (7,235       | )     |  |           | (4,576 | )      |          |   | (6,540 | )             |  |   | (7,370       | )     |  |   | (6,349 | )     |  |   | (7,108 | )    
|Interest income (expense), net                                |                            |                                          | (67    | )     |          |   | (35    | )             |  |   | (55          | )     |  |           | (34    | )      |          |   | 34     |               |  |   | 35           |       |  |   | 8      |       |  |   | 89     |      
|Other income                                                  |                            |                                          | 250    |       |          |   | 306    |               |  |   | 269          |       |  |           | 242    |        |          |   | 275    |               |  |   | 274          |       |  |   | 277    |       |  |   | 272    |      
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |      
|Net loss                                                      |                            | $                                        | (5,447 | )     |          | $ | (7,551 | )             |  | $ | (7,021       | )     |  | $         | (4,368 | )      |          | $ | (6,231 | )             |  | $ | (7,061       | )     |  | $ | (6,064 | )     |  | $ | (6,747 | )    
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |      
|Basic and diluted net loss per share                          |                            | $                                        | (0.21  | )     |          | $ | (0.28  | )             |  | $ | (0.26        | )     |  | $         | (0.16  | )      |          | $ | (0.20  | )             |  | $ | (0.23        | )     |  | $ | (0.18  | )     |  | $ | (0.19  | )    
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |      
|Shares used in computing basic and diluted net loss per share |                            |                                          | 26,566 |       |          |   | 26,607 |               |  |   | 26,703       |       |  |           | 27,886 |        |          |   | 30,741 |               |  |   | 31,182       |       |  |   | 33,394 |       |  |   | 35,742 |      
|                                                              |                            |                                          |        |       |          |   |        |               |  |   |              |       |  |           |        |        |          |   |        |               |  |   |              |      

Contractual Obligations




|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |       |  |  |   |        | 
|--------------------- |  | -------------- | ------ | -------- | ------- | - | ------ | ----------- |  | ------- | ---------- |  | --------- | ----- | ----- |  |  | - | ------ | 
|                      |  |                |        |          |         |   |        |             |  | More    |           
|                      |  |                |        | One Year |         |   | Two to |             |  | Four to |            |  | than Five |      
|                      |  | Total          |        |          | or Less |   |        | Three Years |  |         | Five Years |  |           | Years |      
|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |      
|                      |  | (In thousands) |       
|Long-term debt        |  | $              | 14,003 |          |         | $ | 1,293  |             |  | $       | 1,879      |  |           | $     | 1,345 |  |  | $ | 9,486  | 
|Operating leases      |  |                | 3,937  |          |         |   | 428    |             |  |         | 669        |  |           |       | 381   |  |  |   | 2,459  | 
|Employment agreements |  |                | 329    |          |         |   | 329    |             |  |         |           |  |           |       |      |  |  |   |       | 
|Consulting agreements |  |                | 862    |          |         |   | 298    |             |  |         | 410        |  |           |       | 154   |  |  |   |       | 
|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |      
|Total                 |  | $              | 19,131 |          |         | $ | 2,348  |             |  | $       | 2,958      |  |           | $     | 1,880 |  |  | $ | 11,945 | 
|                      |  |                |        |          |         |   |        |             |  |         |            |  |           |       |      

Off-Balance Sheet Arrangements


S-K.


57



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

Interest Rate Risk






Equity Price Risk and Foreign Currency Exchange Rate Risk













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

10-K.







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








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

Evaluation of Disclosure Controls and Procedures. 10-K.


58



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Changes in Internal Control over Financial Reporting. 10-K


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




10-K.







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






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management








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



59



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






PART IV







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

Consolidated Financial Statements


10-K:


|                                                        |  |      |     | 
|------------------------------------------------------- |  | ---- | --- | 
|                                                        |  | 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 | 

Financial Statement Schedules




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 Therapeutics, Inc. (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                                                                                                  
|        | 4  | .4(20)    |  |                        |  | Form of Stock Purchase Warrant                                                                                                  
|        | 10 | .1(1)     |  |                        |  | Form of Indemnification Agreement between Introgen and each
    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

60



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|        |    |             |  |                         |  |                                                                                                                                                                                                     
|------- | -- | ----------- |  | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             |  |                        
|Number  |    |             |  | Description of Document
|        |    |             |  |                        
|        | 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                                                                                                                               
|        | 10 | .7(f)(13)   |  |                        |  | Modification Agreement effective April 1, 2004 by TMX
    Realty Corporation and Texas State Bank (formerly known as
    Riverway Bank), 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                                                                                                  

61



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|        |    |            |  |                         |  |                                                                                                                                                                     
|------- | -- | ---------- |  | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            |  |                        
|Number  |    |            |  | Description of Document
|        |    |            |  |                        
|        | 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                                                                      
|        | 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 and Mulier Capital Limited                                                           
|        | 10 | .47(16)*   |  |                        |  | Stock Purchase Agreement dated May 2, 2005, by and between
    Introgen and David G. Nance                                                                          
|        | 10 | .48(16)*   |  |                        |  | Stock Purchase Agreement dated May 2, 2005, by and between
    Introgen and J. David Enloe, Jr.                                                                     
|        | 10 | .49(17)    |  |                        |  | Letter Agreement dated July 26, 2005, by and between
    Introgen and SR Pharma plc                                                                                 
|        | 10 | .50(18)    |  |                        |  | Letter Agreement dated April 20, 2005 by and between
    Introgen and Suiter Limited                                                                                

62



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|        |    |          |  |                         |  |                                                                                                                                                                              
|------- | -- | -------- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |          |  |                        
|Number  |    |          |  | Description of Document
|        |    |          |  |                        
|        | 10 | .51(19)* |  |                        |  | Stock Purchase Agreement dated October 26, 2005, by and
    between Introgen and David G. Nance                                                                              
|        | 10 | .52(20)  |  |                        |  | Letter Agreement Amendment dated July 14, 2005, by and
    between Introgen and Suiter Limited                                                                               
|        | 10 | .53    |  |                        |  | Oral Healthcare Alliance Agreement dated November 4, 2005,
    by and between Introgen and Colgate-Palmolive Company                                                         
|        | 10 | .54      |  |                        |  | Common Stock Purchase Agreement dated November 4, 2005, by
    and between Introgen and Colgate-Palmolive Company                                                            
|        | 10 | .55(21)  |  |                        |  | Letter Agreement dated February 24, 2006, by and between
    Introgen and Aventis Pharmaceuticals, Inc.                                                                      
|        | 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 65)                                                                                                                                              
|        | 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 our Registration Statement on
    Form S-1
    (No. 333-30582)
    filed with the Commission on February 17, 2000.                                                                                   
|   
|(2) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 2 to our Registration Statement on
    Form S-1
    (No. 333-30582)
    filed with the Commission on September 8, 2000.                                                                
|   
|(3) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 3 to our Registration Statement on
    Form S-1
    (No. 333-30582)
    filed with the Commission on October 4, 2000.                                                                  
|   
|(4) | Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q, for the
    quarter ended December 31, 2000, (File
    No. 000-21291),
    filed with the Commission on February 14, 2001.                                    
|   
|(5) | Incorporated by reference to the same-numbered exhibit filed
    with our Annual Report on
    Form 10-K for the
    fiscal year ended June 30, 2001 (File
    No. 000-21291),
    filed with the Commission on September 19, 2001.                                        
|   
|(6) | Incorporated by reference to the same-numbered exhibit filed
    with our Transition Report on
    Form 10-KT for the
    six-month transition period ended December 31, 2001 (File
    No. 000-21291),
    filed with the Commission on March 20, 2002.                   
|   
|(7) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 1 to our Transition Report on
    Form 10-KT for the
    six-month transition period ended December 31, 2001 (File
    No. 000-21291),
    filed with the Commission on March 26, 2002.
|   
|(8) | Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q, for the
    quarter ended March 31, 2002 (File
    No. 000-21291),
    filed with the Commission on May 15, 2002.                                             
|   
|(9) | Incorporated by reference to the same-numbered exhibit filed
    with our Current Report on
    Form 8-K, filed
    with the Commission on June 18, 2003.                                                                                                                  



|     |                                                                                                                                                              
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the same-numbered exhibit filed
    with our Current Report on
    Form 8-K, filed
    with the Commission on November 26, 2003.
|    
|(11) | Incorporated by reference to the same-numbered exhibit filed
    with our Current Report on
    Form 8-K, filed
    with the Commission on December 10, 2004.

63



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|     |                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | See Access to Company Information on page 1 of
    this Annual Report on
    Form 10-K.                                                                                                                                               
|    
|(13) | Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q, for the
    quarter ended June 30, 2004 (File
    No. 000-21291),
    filed with the Commission on August 16, 2004.        
|    
|(14) | Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q, for the
    quarter ended September 30, 2004 (File
    No. 000-21291),
    filed with the Commission on November 15, 2004. 
|    
|(15) | Incorporated by reference to the same-numbered exhibit filed
    with Amendment No. 1 to our
    Form 10-K/ A for
    the fiscal year ended December 31, 2003 (File
    No. 000-21291),
    filed with the Commission on April 29, 2004.
|    
|(16) | Incorporated by reference to the same-numbered exhibit filed
    with our Current Report on
    Form 8-K, filed
    with the Commission on May 4, 2005.                                                                                 
|    
|(17) | Incorporated by reference to the same-numbered exhibit filed
    with our Current Report on
    Form 8-K, filed
    with the Commission on August 1, 2005.                                                                              
|    
|(18) | Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q, for the
    quarter ended June 30, 2005 (File No. 000-21291),
    filed with the Commission on August 9, 2005.             
|    
|(19) | Incorporated by reference to the exhibit filed with our Current
    Report on
    Form 8-K, filed
    with the Commission on November 1, 2005.                                                                                          
|    
|(20) | Incorporated by reference to the same-numbered exhibit filed
    with our Quarterly Report on
    Form 10-Q, for the
    quarter ended September 30, 2005 (File No. 000-21291),
    filed with the Commission on November 9, 2005.      
|    
|(21) | Incorporated by reference to the exhibit filed with our Current
    Report on
    Form 8-K, filed
    with the Commission on February 24, 2006.                                                                                         



| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | Confidential treatment has been granted for portions of this
    exhibit.



|   |                                                                            
|-- | ---------------------------------------------------------------------------
| | Confidential treatment has been requested for portions of this
    exhibit.



| |   |                                                                       
| | - | ----------------------------------------------------------------------
| | * | Indicates management contract or compensatory plan or
    arrangement.

Exhibits




Financial Statement Schedules




64



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##### Table of Contents






SIGNATURES


10-K




| |                            
| | ---------------------------
| | INTROGEN THERAPEUTICS, INC.



| |     |                   
| | --- | ------------------
| | By: | /s/ DAVID G. NANCE

| |                                                
| | -----------------------------------------------
| |                                                
| | David G. Nance                                 
| | President, 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


attorney-in 10-K,


10-K


|                                                                  |  |                                                                                    |  |                |  | 
|----------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                                         |  | Title                                                                              |  | Date          
|                                                                  |  |                                                                                    |  |               
|                                                                 
|/s/ DAVID G. NANCE(David G. Nance)                                |  | President, Chief Executive Officer, and Director (Principal
    Executive Officer) |  | March 16, 2006
|                                                                 
|/s/ JAMES W. ALBRECHT,
    JR(James W. Albrecht, Jr.)             |  | Chief Financial Officer (Principal Financial and Accounting
    Officer)           |  | March 16, 2006
|                                                                 
|/s/ JOHN N. KAPOOR,
    PH.D.(John N. Kapoor, Ph.D.)              |  | Chairman of the Board and Director                                                 |  | March 16, 2006
|                                                                 
|/s/ WILLIAM H. CUNNINGHAM,
    PH.D(William H. Cunningham, Ph.D.) |  | Director                                                                           |  | March 12, 2006
|                                                                 
|/s/ MALCOLM GILLIS,
    PH.D(Malcolm Gillis, Ph.D.)               |  | Director                                                                           |  | March 16, 2006
|                                                                 
|/s/ CHARLES E. LONG(Charles E. Long)                              |  | Director                                                                           |  | March 16, 2006
|                                                                 
|/s/ PETER BARTON HUTT(Peter Barton Hutt)                          |  | Director                                                                           |  | March 16, 2006

65



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
























F-1



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















F-2



---



##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        |  |       |          |        | 
|------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------- | ----- | -------- | ------ |  | ----- | -------- | ------ | 
|                                                                                                 |                                                                                                                                                                                            | December 31,                                            |      
|                                                                                                 |                                                                                                                                                                                            |                                                         |      
|                                                                                                 |                                                                                                                                                                                            | 2004                                                    |       |          | 2005   | 
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | (Amounts in thousands)                                  |      
|ASSETS                                                                                          
|Current Assets:                                                                                  |                                                                                                                                                                                            |                                                         |       |          |        |  |       |         
|                                                                                                 | Cash and cash equivalents                                                                                                                                                                  |                                                         | $     | 30,187   |        |  | $     | 28,090   |       
|                                                                                                 | Short term investments                                                                                                                                                                     |                                                         |       | 7,993    |        |  |       | 5,032    |       
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total cash, cash equivalents and short term investments |       |          | 38,180 |  |       |          | 33,122 | 
|                                                                                                 | Marketable securities                                                                                                                                                                      |                                                         |       |         |        |  |       | 2,892    |       
|                                                                                                 | Prepaid expense and other current assets                                                                                                                                                   |                                                         |       | 659      |        |  |       | 297      |       
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total current assets                                    |       |          | 38,839 |  |       |          | 36,311 | 
|Property and equipment, net of accumulated depreciation of
    $10,983 and $12,588, respectively |                                                                                                                                                                                            |                                                         | 7,277 |          |        |  | 6,181 |         
|Grant rights acquired                                                                            |                                                                                                                                                                                            |                                                         | 1,582 |          |        |  | 163   |         
|Other assets                                                                                     |                                                                                                                                                                                            |                                                         | 359   |          |        |  | 326   |         
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total assets                                            |       | $        | 48,057 |  |       | $        | 42,981 | 
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                            
|Current Liabilities:                                                                             |                                                                                                                                                                                            |                                                         |       |          |        |  |       |         
|                                                                                                 | Accounts payable                                                                                                                                                                           |                                                         | $     | 2,683    |        |  | $     | 2,258    |       
|                                                                                                 | Accrued liabilities                                                                                                                                                                        |                                                         |       | 3,572    |        |  |       | 3,296    |       
|                                                                                                 | Deferred revenue                                                                                                                                                                           |                                                         |       | 30       |        |  |       | 472      |       
|                                                                                                 | Current portion of notes payable                                                                                                                                                           |                                                         |       | 573      |        |  |       | 756      |       
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total current liabilities                               |       |          | 6,858  |  |       |          | 6,782  | 
|Notes payable, net of current portion                                                            |                                                                                                                                                                                            |                                                         | 7,901 |          |        |  | 7,784 |         
|Deferred revenue, long-term                                                                      |                                                                                                                                                                                            |                                                         | 1,132 |          |        |  | 1,404 |         
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total liabilities                                       |       |          | 15,891 |  |       |          | 15,970 | 
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|Commitments and Contingencies (Note 10)                                                          |                                                                                                                                                                                            |                                                         |       |          |        |  |       |         
|Stockholders Equity:                                                                            |                                                                                                                                                                                            |                                                         |       |          |        |  |       |         
|                                                                                                 | Preferred stock, $.001 par value per share;
    5,000 shares authorized; 4,900 shares issuable; 100
    and zero Series A shares issued and outstanding in 2004 and
    2005, respectively |                                                         |       | 1        |        |  |       |         |       
|                                                                                                 | Common stock, $.001 par value per share;
    100,000 shares authorized; 30,622 and 37,147 shares
    issued and outstanding in 2004 and 2005, respectively                                 |                                                         |       | 30       |        |  |       | 37       |       
|                                                                                                 | Additional paid-in capital                                                                                                                                                                 |                                                         |       | 149,652  |        |  |       | 170,675  |       
|                                                                                                 | Deferred compensation                                                                                                                                                                      |                                                         |       | (161     | )      |  |       | (68      | )     
|                                                                                                 | Accumulated deficit                                                                                                                                                                        |                                                         |       | (117,356 | )      |  |       | (143,459 | )     
|                                                                                                 | Accumulated other comprehensive loss                                                                                                                                                       |                                                         |       |         |        |  |       | (174     | )     
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total stockholders equity                              |       |          | 32,166 |  |       |          | 27,011 | 
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 
|                                                                                                 |                                                                                                                                                                                            | Total liabilities and stockholders equity              |       | $        | 48,057 |  |       | $        | 42,981 | 
|                                                                                                 |                                                                                                                                                                                            |                                                         |       |          |        | 



F-3



---



##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                              |                            |                                   |         |        |         |   |         |        |         |   |         |        |         |  
|------------------------------------------------------------- | -------------------------- | --------------------------------- | ------- | ------ | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                                              |                            | Year Ended December 31,           |        
|                                                              |                            |                                   |        
|                                                              |                            | 2003                              |         |        | 2004    |   |         | 2005   |        
|                                                              |                            |                                   |         |        |         |   |         |        |        
|                                                              |                            | (Amounts in thousands, except     |        
|                                                              |                            | per share amounts)                |        
|Contract services, grant and other revenue                    |                            | $                                 | 304     |        |         | $ | 1,808   |        |         | $ | 1,867   |       
|Operating costs and expense:                                  |                            |                                   |         |        |         |   |         |        |         |   |         |       
|                                                              | Research and development   |                                   |         | 14,973 |         |   |         | 20,474 |         |   |         | 21,400 |        
|                                                              | General and administrative |                                   |         | 6,102  |         |   |         | 6,597  |         |   |         | 7,834  |        
|                                                              |                            |                                   |         |        |         |   |         |        |        
|                                                              |                            | Total operating costs and expense |         |        | 21,075  |   |         |        | 27,071  |   |         |        | 29,234  |  
|                                                              |                            |                                   |         |        |         |   |         |        |        
|Loss from operations                                          |                            |                                   | (20,771 | )      |         |   | (25,263 | )      |         |   | (27,367 | )     
|Interest income                                               |                            |                                   | 1,017   |        |         |   | 309     |        |         |   | 787     |       
|Interest expense                                              |                            |                                   | (624    | )      |         |   | (500    | )      |         |   | (621    | )     
|Other income                                                  |                            |                                   | 1,052   |        |         |   | 1,067   |        |         |   | 1,098   |       
|                                                              |                            |                                   |         |        |         |   |         |        |        
|                                                              |                            | Net loss                          |         | $      | (19,326 | ) |         | $      | (24,387 | ) |         | $      | (26,103 | )
|                                                              |                            |                                   |         |        |         |   |         |        |        
|Net loss per share, basic and diluted                         |                            | $                                 | (0.84   | )      |         | $ | (0.91   | )      |         | $ | (0.80   | )     
|                                                              |                            |                                   |         |        |         |   |         |        |        
|Shares used in computing basic and diluted net loss per share |                            |                                   | 22,902  |        |         |   | 26,943  |        |         |   | 32,780  |       
|                                                              |                            |                                   |         |        |         |   |         |        |        



F-4



---



##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                                           |                                                                                                      |                        |      |   |              |   |    |            |  |  |          |   |             |             |       |   |               |   |         |         |  |   |      |   |  |       |          |   |  |   |      |      |   |   |         |      |  
|---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------- | ---- | - | ------------ | - | -- | ---------- |  |  | -------- | - | ----------- | ----------- | ----- | - | ------------- | - | ------- | ------- |  | - | ---- | - |  | ----- | -------- | - |  | - | ---- | ---- | - | - | ------- | ---- | -
|                                                                                                           |                                                                                                      | Series A               |      |   |              |   |    |            |  |  |          |   |             |             |       |   |              
|                                                                                                           |                                                                                                      | Non-Voting             |      |   |              |   |    |            |  |  |          |   |             |             |       |   |              
|                                                                                                           |                                                                                                      | Convertible            |      |   |              |   |    |            |  |  |          |   | Accumulated |             |       |  
|                                                                                                           |                                                                                                      | Preferred Stock        |      |   | Common Stock |   |    | Additional |  |  |          |   |             |             | Other |   |               |  
|                                                                                                           |                                                                                                      |                        |      |   |              |   |    | Paid-In    |  |  | Deferred |   |             | Accumulated |       |   | Comprehensive |   |         |        
|                                                                                                           |                                                                                                      | Shares                 |      |   | Amount       |   |    | Shares     |  |  | Amount   |   |             | Capital     |       |   | Compensation  |   |         | Deficit |  |   | Loss |   |  | Total |         
|                                                                                                           |                                                                                                      |                        |      |   |              |   |    |            |  |  |          |   |             |             |       |   |               |   |         |         |  |   |      |   |  |       |         
|                                                                                                           |                                                                                                      | (Amounts in thousands) |     
|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 share-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 share-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  |     
|Issuance of common stock in a direct equity offering in November
    2005, net of offering costs of $414   |                                                                                                      |                        |     |   |              |   |   |            |  |  | 3,611    |   |             |             | 4     |   |               |   | 19,581  |         |  |   |     |   |  |       |         |   |  |   |     |      |   |   | 19,585  |     
|Issuance of common stock in connection with exercise of stock
    options                                  |                                                                                                      |                        |     |   |              |   |   |            |  |  | 457      |   |             |             |      |   |               |   | 615     |         |  |   |     |   |  |       |         |   |  |   |     |      |   |   | 615     |     
|Issuance of common stock in connection with the grant of stock                                             |                                                                                                      |                        |     |   |              |   |   |            |  |  | 113      |   |             |             |      |   |               |   | 687     |         |  |   |     |   |  |       |         |   |  |   |     |      |   |   | 687     |     
|Addition to deferred compensation relating to issuance of stock
    options                                |                                                                                                      |                        |     |   |              |   |   |            |  |  |         |   |             |             |       |   |               |   | 142     |         |  |   | (142 | ) |  |       |         |   |  |   |     |      |   |   |        |     
|Conversion of preferred stock to common stock                                                              |                                                                                                      |                        | (100 | ) |              |   | (1 | )          |  |  | 2,344    |   |             |             | 3     |   |               |   | (2      | )       |  |   |     |   |  |       |         |   |  |   |     |      |   |   |        |     
|Amortization of deferred compensation and share-based
    compensation                                     |                                                                                                      |                        |     |   |              |   |   |            |  |  |         |   |             |             |      |   |               |   |        |         |  |   | 235  |   |  |       |         |   |  |   |     |      |   |   | 235     |     
|Comprehensive loss                                                                                         |                                                                                                      |                        |     |   |              |   |   |            |  |  |         |   |             |             |      |   |               |   |        |         |  |   |     |   |  |       | (26,103  | ) |  |   |     |      |   |   | (26,103 | )   
|                                                                                                           | Net loss Unrealized loss on marketable securities                                                    |                        |      |  |              |   |    |           |  |  |          |  |             |             |       |  |               |   |         |        |  |   |      |  |  |       |          |  |  |   |      | (149 | ) |   |         | (149 | )
|                                                                                                           | Foreign currency translation adjustment, cumulative translation
    loss of $25 at December 31, 2005 |                        |      |  |              |   |    |           |  |  |          |  |             |             |       |  |               |   |         |        |  |   |      |  |  |       |          |  |  |   |      | (25  | ) |   |         | (25  | )
|Total comprehensive loss                                                                                   |                                                                                                      |                        |      |   |              |   |    |            |  |  |          |   |             |             |       |   |               |   |         |         |  |   |      |   |  |       |          |   |  |   |      |      |   |   | (26,277 | )   
|                                                                                                           |                                                                                                      |                        |      |   |              |   |    |            |  |  |          |   |             |             |       |   |               |   |         |         |  |   |      |   |  |       |         
|Balance, December 31, 2005                                                                                 |                                                                                                      |                        |     |   |              | $ |   |            |  |  | 37,147   |   |             | $           | 37    |   |               | $ | 170,675 |         |  | $ | (68  | ) |  | $     | (143,459 | ) |  | $ | (174 | )    |   | $ | 27,011  |     
|                                                                                                           |                                                                                                      |                        |      |   |              |   |    |            |  |  |          |   |             |             |       |   |               |   |         |         |  |   |      |   |  |       |         



F-5



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |       |         |        |         |       |         |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------- | ----- | ------- | ------ | ------- | ----- | ------- | ------ | ------- | ----- | ------- | -
|                                                                            |                                                                                 | Year Ended December 31,               |                                                                                                      
|                                                                            |                                                                                 |                                       |                                                                                                      
|                                                                            |                                                                                 | 2003                                  |                                                                                                       |         | 2004  |         |        | 2005    |      
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            |                                                                                 | (Amounts in thousands)                |                                                                                                      
|Cash flows from operating activities:                                       |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |       |         |        |        
|                                                                            | Net loss                                                                        |                                       | $                                                                                                     | (19,326 | )     |         | $      | (24,387 | )     |         | $      | (26,103 | )    
|                                                                            | Adjustments to reconcile net loss to net cash used in operating
    activities: |                                       |                                                                                                       |         |       |         |        |         |       |         |        |         |      
|                                                                            |                                                                                 | Depreciation                          |                                                                                                       |         | 1,475 |         |        |         | 1,322 |         |        |         | 1,605 |        
|                                                                            |                                                                                 | Share-based compensation              |                                                                                                       |         | 1,362 |         |        |         | 253   |         |        |         | 922   |        
|                                                                            |                                                                                 | Amortization of grant rights acquired |                                                                                                       |         |      |         |        |         | 159   |         |        |         | 1,419 |        
|                                                                            |                                                                                 | Changes in assets and liabilities:    |                                                                                                       |         |       |         |        |         |       |         |        |         |       |        
|                                                                            |                                                                                 |                                       | (Increase) decrease in other assets                                                                   |         |       | 523     |        |         |       | (532    | )      |         |       | 395     |  
|                                                                            |                                                                                 |                                       | Increase (decrease) in accounts payable                                                               |         |       | 280     |        |         |       | 629     |        |         |       | (425    | )
|                                                                            |                                                                                 |                                       | Increase (decrease) in accrued liabilities                                                            |         |       | 538     |        |         |       | 773     |        |         |       | (275    | )
|                                                                            |                                                                                 |                                       | Increase (decrease) in deferred revenue                                                               |         |       | 204     |        |         |       | 270     |        |         |       | 714     |  
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net cash used in operating activities                                                                 |         |       | (14,944 | )      |         |       | (21,513 | )      |         |       | (21,748 | )
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|Cash flows from investing activities:                                       |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |       |         |        |        
|                                                                            | Purchases of property and equipment                                             |                                       |                                                                                                       | (233    | )     |         |        | (1,097  | )     |         |        | (509    | )    
|                                                                            | Purchases of short-term investments                                             |                                       |                                                                                                       |        |       |         |        | (38,383 | )     |         |        | (31,869 | )    
|                                                                            | Maturities of short-term investments                                            |                                       |                                                                                                       |        |       |         |        | 30,390  |       |         |        | 34,830  |      
|                                                                            | Purchase of marketable securities                                               |                                       |                                                                                                       |        |       |         |        |        |       |         |        | (3,041  | )    
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net cash used in investing activities                                                                 |         |       | (233    | )      |         |       | (9,090  | )      |         |       | (589    | )
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|Cash flows from financing activities:                                       |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |       |         |        |        
|                                                                            | Proceeds from sale of common stock, net of offering costs                       |                                       |                                                                                                       | 29,315  |       |         |        | 22,894  |       |         |        | 19,585  |      
|                                                                            | Proceeds from exercise of options for common stock                              |                                       |                                                                                                       | 98      |       |         |        | 644     |       |         |        | 615     |      
|                                                                            | Proceeds from notes payable                                                     |                                       |                                                                                                       | 314     |       |         |        | 1,448   |       |         |        | 772     |      
|                                                                            | Principal payments under notes payable and capital leases                       |                                       |                                                                                                       | (1,620  | )     |         |        | (593    | )     |         |        | (707    | )    
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net cash provided by financing activities                                                             |         |       | 28,107  |        |         |       | 24,393  |        |         |       | 20,265  |  
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|Effect of exchange rate changes on cash                                     |                                                                                 |                                       |                                                                                                      |         |       |         |       |         |       |         | (25    | )      
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Net increase (decrease) in cash                                                                       |         |       | 12,930  |        |         |       | (6,210  | )      |         |       | (2,097  | )
|Cash and cash equivalents, beginning of period                              |                                                                                 |                                       | 23,467                                                                                                |         |       |         | 36,397 |         |       |         | 30,187 |        
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|Cash and cash equivalents, end of period                                    |                                                                                 | $                                     | 36,397                                                                                                |         |       | $       | 30,187 |         |       | $       | 28,090 |        
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|Supplemental disclosure of cash flow information:                           |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |       |         |        |        
|                                                                            |                                                                                 |                                       | Cash paid for interest                                                                                |         | $     | 624     |        |         | $     | 472     |        |         | $     | 580     |  
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            |                                                                                 |                                       | Cash paid for taxes for the issuance of common stock in
    connection with the grant of common stock |         | $     |        |        |         | $     |        |        |         | $     | 411     |  
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|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     |       |         | $      |        |      
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            | Issuance of common stock in connection with the grant of stock                  |                                       | $                                                                                                     |        |       |         | $      |        |       |         | $      | 687     |      
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            | Purchases of equipment under capital lease obligations                          |                                       | $                                                                                                     | 314     |       |         | $      |        |       |         | $      |        |      
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      
|                                                                            | Proceeds from insurance financing notes                                         |                                       | $                                                                                                     |        |       |         | $      | 123     |       |         | $      | 117     |      
|                                                                            |                                                                                 |                                       |                                                                                                       |         |       |         |        |         |      



F-6



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2005




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



in vivo




® mda-7












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





| |                      
| | ---------------------
| | Marketable Securities



F-8



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                        
| | -----------------------
| | Risks and Uncertainties





| |                  
| | -----------------
| | Intangible Assets





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





|                              |                              |              |         |        |      |   |         |        | 
|----------------------------- | ---------------------------- | ------------ | ------- | ------ | ---- | - | ------- | ------ | 
|                              |                              | December 31, |        
|                              |                              |              |        
|                              |                              | 2004         |         |        | 2005 |  
|                              |                              |              |         |        |      |  
|Facilities                    |                              | $            | 12,415  |        |      | $ | 12,524  |       
|Equipment                     |                              |              | 5,845   |        |      |   | 6,245   |       
|                              |                              |              |         |        |      |  
|                              | Total property and equipment |              |         | 18,260 |      |   |         | 18,769 | 
|Less accumulated depreciation |                              |              | (10,983 | )      |      |   | (12,588 | )     
|                              |                              |              |         |        |      |  
|                              | Net property and equipment   |              | $       | 7,277  |      |   | $       | 6,181  | 
|                              |                              |              |         |        |      |  





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



F-9



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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



|                                         |                           |              |     |       |      |   |     |       | 
|---------------------------------------- | ------------------------- | ------------ | --- | ----- | ---- | - | --- | ----- | 
|                                         |                           | December 31, |    
|                                         |                           |              |    
|                                         |                           | 2004         |     |       | 2005 |  
|                                         |                           |              |     |       |      |  
|Clinical costs due unrelated parties     |                           | $            | 803 |       |      | $ | 267 |      
|Pre-clinical costs due related parties   |                           |              | 631 |       |      |   | 677 |      
|Pre-clinical costs due unrelated parties |                           |              | 138 |       |      |   | 124 |      
|Property taxes                           |                           |              | 421 |       |      |   | 366 |      
|Franchise and use taxes                  |                           |              | 219 |       |      |   | 312 |      
|Payroll                                  |                           |              | 64  |       |      |   | 78  |      
|Vacation                                 |                           |              | 249 |       |      |   | 349 |      
|Legal and accounting fees                |                           |              | 549 |       |      |   | 490 |      
|Other vendor charges not yet billed      |                           |              | 498 |       |      |   | 633 |      
|                                         |                           |              |     |       |      |  
|                                         | Total accrued liabilities |              | $   | 3,572 |      |   | $   | 3,296 | 
|                                         |                           |              |     |       |      |  





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









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



F-10



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





| |                         
| | ------------------------
| | Share-Based Compensation







F-11



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                                                                    |                                 |                         |         |       |      |   |         |       |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ----------------------- | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | -
|                                                                                                                    |                                 | Year Ended December 31, |        
|                                                                                                                    |                                 |                         |        
|                                                                                                                    |                                 | 2003                    |         |       | 2004 |   |         | 2005  |  
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|Net loss, as reported                                                                                               |                                 | $                       | (19,326 | )     |      | $ | (24,387 | )     |   | $ | (26,103 | )    
|Add: Share-based employee compensation expense included in
    reported net loss                                    |                                 |                         | 1,169   |       |      |   | 32      |       |   |   | 1,098   |      
|Deduct: Total share-based employee compensation expense
    determined under fair value based method for all awards |                                 |                         | (4,126  | )     |      |   | (2,834  | )     |   |   | (5,268  | )    
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|Pro forma net loss                                                                                                  |                                 | $                       | (22,283 | )     |      | $ | (27,189 | )     |   | $ | (30,273 | )    
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|Loss per share:                                                                                                     |                                 |                         |         |       |      |   |         |       |   |   |         |      
|                                                                                                                    | Basic and Diluted  as reported |                         | $       | (0.84 | )    |   | $       | (0.91 | ) |   | $       | (0.80 | )
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  
|                                                                                                                    | Basic and Diluted  pro forma   |                         | $       | (0.97 | )    |   | $       | (1.01 | ) |   | $       | (0.92 | )
|                                                                                                                    |                                 |                         |         |       |      |   |         |       |  





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



|                                         |  |                         |         |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | Year Ended December 31, |        
|                                         |  |                         |        
|                                         |  | 2003                    |         |   | 2004 |   |         | 2005 | 
|                                         |  |                         |         |   |      |   |         |      | 
|Net loss                                 |  | $                       | (19,326 | ) |      | $ | (24,387 | )    |  | $ | (26,103 | )
|Foreign currency translation loss        |  |                         |        |   |      |   |        |      |  |   | (25     | )
|Unrealized loss on marketable securities |  |                         |        |   |      |   |        |      |  |   | (149    | )
|                                         |  |                         |         |   |      |   |         |      | 
|Total comprehensive loss                 |  | $                       | (19,326 | ) |      | $ | (24,387 | )    |  | $ | (26,277 | )
|                                         |  |                         |         |   |      |   |         |      | 



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



F-12



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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         |       |  | 2005         |  
|                      |  |              |       |  |              |  
|                      |  | Gross        |       |  |              |   | Net  |          |  | Gross |          |  |  |              | Net   | 
|                      |  | Carrying     |       |  | Accumulated  |   |      | Carrying |  |       | Carrying |  |  | Accumulated  |       |  | Carrying |  
|                      |  | Amount       |       |  | Amortization |   |      | Amount   |  |       | Amount   |  |  | Amortization |       |  | Amount   |  
|                      |  |              |       |  |              |   |      |          |  |       |          |  |  |              |       |  |          |  
|Asset Acquisition:    |  |              |       |  |              |   |      |          |  |       |          |  |  |              |       |  |          |   |        |   |  |   |     | 
|Acquired Grant Rights |  | $            | 1,741 |  |              | $ | (159 | )        |  | $     | 1,582    |  |  | $            | 1,741 |  |          | $ | (1,578 | ) |  | $ | 163 | 
|                      |  |              |       |  |              |   |      |          |  |       |          |  |  |              |       |  |          |  
|Ending Balance        |  | $            | 1,741 |  |              | $ | (159 | )        |  | $     | 1,582    |  |  | $            | 1,741 |  |          | $ | (1,578 | ) |  | $ | 163 | 
|                      |  |              |       |  |              |   |      |          |  |       |          |  |  |              |       |  |          |  





|   |                            
|-- | ---------------------------
|5. | Investment in SR Pharma plc



F-13



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                     
|-- | --------------------
|6. | Stockholders Equity



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











| |                               
| | ------------------------------
| | Common Stock Grant to Officers







| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Conversion of Series A Non-Voting Convertible
    Preferred Stock to Common Stock



F-14



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










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















F-15



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Common Stock Grant to Officers




|                                 |           |             |           |                  |                |   |      |      | 
|-------------------------------- | --------- | ----------- | --------- | ---------------- | -------------- | - | ---- | ---- | 
|                                 |           |             |           | Weighted Average |               
|                                 |           | Options     |           |                  | Exercise Price |  
|                                 |           | Outstanding |           |                  | per Share      |  
|                                 |           |             |           |                  |                |  
|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 |     
|                                 |           |             |           |                  |                |  
|                                 | Granted   |             |           | 1,256,138        |                |   |      | 6.55 | 
|                                 | Exercised |             |           | (456,714         | )              |   |      | 1.35 | 
|                                 | Cancelled |             |           | (379,329         | )              |   |      | 2.81 | 
|                                 |           |             |           |                  |                |  
|Balance, December 31, 2005       |           |             | 5,978,369 |                  |                |   | 4.49 |     
|                                 |           |             |           |                  |                |  
|Exercisable at December 31, 2005 |           |             | 3,583,200 |                  |                | $ | 3.65 |     
|                                 |           |             |           |                  |                |  





F-16



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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      |             |                   | 2005                |  |           | (In years)       |  |  | Exercise Price   |                   |  | 2005         |      |  | Exercise Price   | 
|                    |             |                   |                     |  |           |                  |  |  |                  |                   |  |              |      |  |                  | 
|                    | $0.39-$3.50 |                   |                     |  | 1,490,913 |                  |  |  | 3.75             |                   |  | $            | 1.08 |  |                  |  | 1,349,863 |  |  | $ | 1.03 | 
|                    | $3.75-$4.92 |                   |                     |  | 1,139,775 |                  |  |  | 6.58             |                   |  |              | 4.43 |  |                  |  | 903,775   |  |  |   | 4.49 | 
|                    | $5.00-$6.18 |                   |                     |  | 1,691,461 |                  |  |  | 7.60             |                   |  |              | 5.21 |  |                  |  | 912,781   |  |  |   | 5.14 | 
|                    | $6.25-$9.65 |                   |                     |  | 1,656,220 |                  |  |  | 9.02             |                   |  |              | 6.87 |  |                  |  | 416,781   |  |  |   | 7.04 | 
|                    |             |                   |                     |  |           |                  |  |  |                  |                   |  |              |      |  |                  | 
|                    |             |                   |                     |  | 5,978,369 |                  |  |  | 6.84             |                   |  |              | 4.49 |  |                  |  | 3,583,200 |  |  |   | 3.65 | 
|                    |             |                   |                     |  |           |                  |  |  |                  |                   |  |              |      |  |                  | 



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





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





| |                              
| | -----------------------------
| | Common Stock Purchase Warrant





|   |                     
|-- | --------------------
|7. | Federal Income Taxes



F-17



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                              |                                                        |                                                             |     |         |        |   |     |         |        |  
|--------------------------------------------- | ------------------------------------------------------ | ----------------------------------------------------------- | --- | ------- | ------ | - | --- | ------- | ------ | -
|                                              |                                                        | 2004                                                        |     |         | 2005   |  
|                                              |                                                        |                                                             |     |         |        |  
|Deferred tax assets:                          |                                                        |                                                             |     |         |        |   |     |        
|                                              | Current deferred tax assets                            |                                                             |     |         |        |   |     |         |       
|                                              |                                                        | Accrued liabilities                                         |     | $       | 601    |   |     | $       | 799    |  
|                                              |                                                        | Unrealized gains and losses                                 |     |         |       |   |     |         | 64     |  
|                                              |                                                        | Other                                                       |     |         | 33     |   |     |         |       |  
|                                              | Valuation allowance for current deferred tax assets    |                                                             |     | (625    | )      |   |     | (862    | )     
|                                              |                                                        |                                                             |     |         |        |  
|                                              | Net current deferred tax assets                        |                                                             |     | 9       |        |   |     | 1       |       
|                                              |                                                        |                                                             |     |         |        |  
|                                              | Noncurrent deferred tax assets                         |                                                             |     |         |        |   |     |         |       
|                                              |                                                        | Net operating loss carryforwards                            |     |         | 33,261 |   |     |         | 40,242 |  
|                                              |                                                        | Research and development tax credits                        |     |         | 1,448  |   |     |         | 1,625  |  
|                                              |                                                        | Orphan drug tax credits                                     |     |         | 7,908  |   |     |         | 9,878  |  
|                                              |                                                        | Tax basis of property and equipment in excess of book basis |     |         | 2,477  |   |     |         | 2,949  |  
|                                              |                                                        | Stock compensation                                          |     |         | 1,662  |   |     |         | 1,380  |  
|                                              |                                                        | Deferred rent                                               |     |         | 419    |   |     |         | 520    |  
|                                              |                                                        | Investments                                                 |     |         |       |   |     |         | 860    |  
|                                              |                                                        | Other                                                       |     |         |       |   |     |         | 62     |  
|                                              | Valuation allowance for noncurrent deferred tax assets |                                                             |     | (46,510 | )      |   |     | (57,377 | )     
|                                              |                                                        |                                                             |     |         |        |  
|                                              | Net noncurrent deferred tax assets                     |                                                             |     | 665     |        |   |     | 139     |       
|                                              |                                                        |                                                             |     |         |        |  
|Deferred tax liabilities:                     |                                                        |                                                             |     |         |        |   |     |        
|                                              | Current deferred tax liabilities                       |                                                             |     |         |        |   |     |         |       
|                                              |                                                        | Prepaid expense                                             |     |         | (89    | ) |     |         | (80    | )
|                                              |                                                        |                                                             |     |         |        |  
|                                              | Total current deferred tax liabilities                 |                                                             |     | (89     | )      |   |     | (80     | )     
|                                              |                                                        |                                                             |     |         |        |  
|                                              | Noncurrent deferred tax liabilities                    |                                                             |     |         |        |   |     |         |       
|                                              |                                                        | Acquired grant rights                                       |     |         | (585   | ) |     |         | (60    | )
|                                              |                                                        |                                                             |     |         |        |  
|                                              | Total noncurrent deferred tax liabilities              |                                                             |     | (585    | )      |   |     | (60     | )     
|                                              |                                                        |                                                             |     |         |        |  
|Net current deferred tax asset (liability)    |                                                        |                                                             | (80 | )       |        |   | (79 | )      
|                                              |                                                        |                                                             |     |         |        |  
|Net noncurrent deferred tax asset (liability) |                                                        | $                                                           | 80  |         |        | $ | 79  |        
|                                              |                                                        |                                                             |     |         |        |  



F-18



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                             |  |                         |       |    |      |  |       |      |  |  |       |   
|-------------------------------------------- |  | ----------------------- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | --
|                                             |  | Year Ended December 31, |      
|                                             |  |                         |      
|                                             |  | 2003                    |       |    | 2004 |  |       | 2005 | 
|                                             |  |                         |       |    |      |  |       |      | 
|Federal statutory rate                       |  |                         | (34.0 | )% |      |  | (34.0 | )%   |  |  | (34.0 | )%
|State taxes, net of federal benefit          |  |                         | (2.8  | )  |      |  | (2.6  | )    |  |  | (2.8  | ) 
|Increase in deferred tax valuation allowance |  |                         | 39.5  |    |      |  | 66.0  |      |  |  | 42.5  |   
|Stock option compensation                    |  |                         | 2.4   |    |      |  | (7.4  | )    |  |  | 1.1   |   
|Orphan drug tax credits                      |  |                         |      |    |      |  | (20.9 | )    |  |  | (5.0  | ) 
|Research and development tax credits         |  |                         | (2.9  | )  |      |  | (2.5  | )    |  |  | (0.7  | ) 
|Other                                        |  |                         | (2.2  | )  |      |  | 1.4   |      |  |  | (1.1  | ) 
|                                             |  |                         |       |    |      |  |       |      | 
|                                             |  |                         |      | %  |      |  |      | %    |  |  |      | % 
|                                             |  |                         |       |    |      |  |       |      | 



|   |              
|-- | -------------
|8. | Notes Payable



225-month






F-19



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |            |       |     |       |       | 
|----------------------------- | ---------- | ----- | --- | ----- | ----- | 
|Year ending December 31, 2006 |            | $     | 756 |      
|                              | 2007       |       |     | 623   |      
|                              | 2008       |       |     | 340   |      
|                              | 2009       |       |     | 257   |      
|                              | 2010       |       |     | 267   |      
|                              | Thereafter |       |     | 6,297 |      
|                              |            |       |    
|                              |            | Total |     | $     | 8,540 | 
|                              |            |       |    





|   |                                
|-- | -------------------------------
|9. | License and Research Agreements



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





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







F-20



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                                  
| | -------------------------------------------------
| | Alliance Agreement with Colgate-Palmolive Company



FUS-1)






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





|    |                              
|--- | -----------------------------
|10. | Commitments and Contingencies



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



F-21



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |            |                              |     |       |       | 
|----------------------------- | ---------- | ---------------------------- | --- | ----- | ----- | 
|                              |            | Operating                    |    
|                              |            | Leases                       |    
|                              |            |                              |    
|Year ending December 31, 2006 |            | $                            | 428 |      
|                              | 2007       |                              |     | 344   |      
|                              | 2008       |                              |     | 325   |      
|                              | 2009       |                              |     | 225   |      
|                              | 2010       |                              |     | 156   |      
|                              | Thereafter |                              |     | 2,459 |      
|                              |            |                              |    
|                              |            | Total minimum lease payments |     | $     | 3,937 | 
|                              |            |                              |    



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





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





|    |                
|--- | ---------------
|11. | Related Parties





month-to






F-22



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##### Table of Contents



INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |                      
|--- | ---------------------
|12. | London Stock Exchange



F-23



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##### Table of Contents



EXHIBIT INDEX


|        |    |       |  |                         |  |                                                                                                                                                                              
|------- | -- | ----- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |  |                        
|Number  |    |       |  | Description of Document
|        |    |       |  |                        
|        | 10 | .53 |  |                        |  | Oral Healthcare Alliance Agreement dated November 4, 2005,
    by and between Introgen and Colgate-Palmolive Company                                                         
|        | 10 | .54   |  |                        |  | Common Stock Purchase Agreement dated November 4, 2005, by
    and between Introgen and Colgate-Palmolive Company                                                            
|        | 21 | .1    |  |                        |  | List of subsidiaries of Introgen                                                                                                                                             
|        | 23 | .1    |  |                        |  | Consent of Independent Registered Public Accounting Firm                                                                                                                     
|        | 24 | .1    |  |                        |  | Power of Attorney (See page 65)                                                                                                                                              
|        | 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






|   |                                                                            
|-- | ---------------------------------------------------------------------------
| | Confidential treatment has been requested for portions of this
    exhibit.