##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-K

[X]






For the fiscal year ended December 31, 1999


OR

[   ]






For the transition period from
        to


Commission File No. 0-23317



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GENE LOGIC INC.

(Exact name of registrant as specified in its
charter)


|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|                                                               
|                                                               
|                                                               
|                                                               
|Delaware                                                        |  | 06-1411336                           
|(State or other jurisdiction of
	incorporation or organization) |  | (I.R.S. Employer
	Identification No.)

708 Quince Orchard Road

Gaithersburg, Maryland 20878


(Address of principal executive offices)


(301) 987-1700


Securities registered pursuant to Section 12(b) of the Act:
None

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

COMMON STOCK, $.01 PAR VALUE

(Title of Class)


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

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405
 of this chapter) is not contained herein, and will not be
contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

The aggregate market value of the voting stock (which consists
solely of shares of Common Stock) held by non-affiliates of the
Registrant as of March 15, 2000 was approximately
$1,743,711,000, based on the closing price on that date of Common
 Stock on the Nasdaq National Stock Market.*

The number of shares outstanding of the Registrants Common
Stock, $.01 par value, was 25,381,606 as of March 15, 2000.

Documents Incorporated By Reference

Registrants Definitive Proxy Statement to be filed with the
 Securities and Exchange Commission (the Commission)
pursuant to Regulation 14A in connection with the 2000
Annual Meeting of Stockholders to be held on June 8, 2000 is
 incorporated by reference into Part III of this Annual Report on
 Form 10-K to the extent stated herein.




|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Excludes 1,184,397 shares of Common Stock held by
	directors and executive officers and stockholders whose
	beneficial ownership exceeds 10% of the shares outstanding on
	March 15, 2000. Exclusion of shares held by any person
	should not be construed to indicate that such person possesses
	the power, direct or indirect, to direct or cause the direction
	of the management or policies of the Registrant, or that such
	person is controlled by or under common control with the
	Registrant.









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TABLE OF CONTENTS



|                                                                                             |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|ITEM 1. BUSINESS                                                                            
|ITEM 2. PROPERTIES                                                                          
|ITEM 3. LEGAL PROCEEDINGS                                                                   
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 
|ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS           
|ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA                                                
|ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
|ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                          
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                         
|ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|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                                     
|ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON FORM 8-K               
|SIGNATURE                                                                                   



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PART I




ITEM 1.  BUSINESS

This Report on Form 10-K contains forward-looking
statements that involve risks and uncertainties. We generally use
 words such as anticipate, estimate,
plans, projects, continuing,
ongoing, expects, management
believes, we believe, we intend and
 similar expressions to indicate when we are making
forward-looking statements. You should not place undue reliance
on these forward-looking statements. The forward-looking
statements speak only as of the date on which they are made, and
we undertake no obligation to update any forward-looking
statement. Forward-looking statements include statements about
the performance and utility of our products, the timing and
availability of products under development, the ability of our
customers to develop products identified using our products, the
adequacy of capital resources and other expectations, plans,
objectives, assumptions or future events. These statements
involve estimates, assumptions and uncertainties that could cause
 actual results to differ materially from those expressed for the
 reasons described in this Report on Form 10-K. These risks
and uncertainties include, but are not limited to, the extent of
utilization of genomic information by the pharmaceutical and
biotechnology industries in both research and development, our
ability to retain existing and obtain additional database
customers, risks relating to the development of genomic database
products and their use by existing and potential customers, the
impact of technological advances and competition, our ability to
enforce our intellectual property rights, and the impact of the
intellectual property rights of others, as well as other risks
and uncertainties set forth below and in the sections entitled
Risk Factors and Managements Discussion
and Analysis of Results of Operations and Financial
Condition.

Unless the context requires otherwise, references in this
Report on Form 10-K to Gene Logic, the
Company, we, us, and
our refer to Gene Logic Inc. and its wholly owned
subsidiary.

READS, GeneExpress, BioExpress,
ToxExpress, PharmExpress, and Flow-thru Chip
are our trademarks. GeneChip® is a registered trademark of
Affymetrix, Inc. Trade names and trademarks of other
companies appearing in this Report on Form 10-K are the
property of their respective holders.

Overview

Gene Logic, a leading provider of genomic information, is
enabling the discovery and development of pharmaceutical,
biotechnology and life science products through the systematic
and industrialized application of genomics. We have built and are
 commercializing what we believe to be the worlds most
comprehensive survey of gene expression in human and animal
tissues. We market two types of gene expression database products
 to the global pharmaceutical, healthcare and life science
industries: our custom databases and related software products,
for which we currently have 12 customers, and our new GeneExpress
 reference database suite, for which we currently have three
customers. Gene expression, which is the degree to which genes in
 a cell are switched on or off, or regulated, is information
critical to understanding the functions of genes. Since genes
direct all biological processes, gene expression information is
increasingly recognized by leading pharmaceutical companies as a
fundamental tool for all aspects of biomedical research,
particularly drug discovery and development.

Since 1997, we have developed custom gene expression databases
designed for each of our customers internal programs and
needs and targeted to specific therapeutic areas of interest,
including heart failure, kidney disease, osteoporosis,
psychiatric disorders and other major illnesses. Building on this
 know-how, in March 1999 we began developing our GeneExpress
 database suite of reference gene expression information. The
GeneExpress databases contain information from a broad range of
normal and diseased human tissues, tissues from experimental
animals, human and animal cell lines and tissues that have been
treated with many different drugs. We completed development of
the first commercial version of the GeneExpress database suite in
 November 1999. We currently market GeneExpress through
nonexclusive subscriptions to customers in the pharmaceutical,
biotechnology and diagnostic industries, and are

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We generate our gene expression data in our own laboratories from
 tissues we collect through our biorepository network using two
complementary technologies  GeneChip microarrays produced
by Affymetrix and our own patented READS technology. The
combination of GeneChip microarrays and READS enables us to
obtain comprehensive coverage of the genes expressed in virtually
 all important tissue types. At the end of 1999, the GeneExpress
database contained gene expression profiles on over 1,000 tissue
samples representing more than 30 million gene expression data
points. By the end of 2003, we expect to have complete profiles
on 30,000 tissue samples representing an estimated 3 billion
 gene expression data points.

We have also developed sophisticated data management software in
conjunction with our database products to enable our customers to
 integrate our information with their own in-house data, as well
as with the gene sequence and other biological information
publicly available on the Internet. Our software includes
powerful tools for the analysis of this information, allowing
users to conduct a broad variety of electronic experiments
designed to answer their specific questions about mechanisms of
disease and drug action.

The GeneExpress database suite can be used for many important
research applications, such as to discover and validate novel
drug targets, develop therapeutic compounds and facilitate
clinical trials and patient management. Because our gene
expression information is warehoused in electronic form in a
relational database, we have the flexibility of repackaging the
data into different versions for customers requiring varying
levels of information and pricing such versions optimally. As a
result, we can market the same information to many different
types of customers, thereby maximizing the revenue potential of
the underlying data. We believe our GeneExpress database suite
will become a fundamental reference source of gene expression
information for many scientists engaged in industrial and
academic biological research. Because the information is
distributed over the Internet, we believe we can also establish a
 portal that will create multiple e-commerce promotional and
transactional revenue opportunities. These may include the
promotion and sale of third party products, such as custom gene
chips, research reagents and specialized genomic diagnostic
products.

We currently have 14 different customers for our custom
databases, data management software and GeneExpress database
suite include:

|                          |  |                                      |  |                            
|------------------------- |  | ------------------------------------ |  | ---------------------------
| Aventis                 |  |  Organon (Akzo Nobel)               |  |  SmithKline Beecham       
| Aventis CropScience     |  |  PE Biosystems                      |  |  Therapeutic Genomics     
| Fujisawa Pharmaceutical |  |  Pfizer                             |  |  UCB Pharma               
| Japan Tobacco           |  |  Procter & Gamble Pharmaceuticals   |  |  Wyeth-Ayerst Laboratories
| Merck & Co.             |  |  Schering-Plough Research Institute |  | (American Home Products)   

These customers provide us with various combinations of
subscription, technology and database access fees, research fees,
 upfront payments, research and product development milestone
payments, and royalty payments that could enable us to receive a
portion of our customers revenues from sales of any
products that result from use of our technology or proprietary
database information.

We have completed over 12,000 expression profiles in a wide
variety of tissues and identified over 2,700 genes involved in
the onset and progression of heart failure, kidney disease,
infertility, psychiatric disorders and other major illnesses and
over 2,100 genes that predict drug toxicity and agricultural crop
 characteristics. We are seeking patent protection for the most
important of these discoveries. Our customers are currently using
 24 of these genes in drug discovery programs from which we would
 be entitled to earn milestone payments and royalties on sales of
 any resulting products.

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The Importance of Gene Expression Information

Diseases result when the physiological pathways that regulate the
 functioning of cells become abnormal or disturbed. The main
components of these pathways are proteins, the synthesis of which
 is directed by genes within the cells. Genes translate their
instructions for protein synthesis into messenger RNA, or mRNA;
the amount of mRNA present in any given cell, which is termed
gene expression, is thus a measure of the genes activity.
While each cell of the human body contains all of the
approximately 100,000 genes, only about 10-20% of the genes are
active in any particular cell type. By analyzing which genes are
expressed in a cell or tissue and to what level, it can be
determined which physiological pathways are active in the cell
and to what degree. By understanding when and where abnormal gene
 expression occurs and the changes in expression that a drug can
cause, the physiological pathways implicated in disease and drug
action can be pinpointed. This knowledge can be used to help
discover drug targets, screen drug leads, predict toxic effects
of compounds, anticipate pharmacological responses to drug leads,
 and tailor clinical trials to the specific needs of subgroups
within a population. By understanding the gene expression
patterns of relevant tissues from patients with a disease,
physicians may also be able to determine which treatments are
likely to be effective for that condition and which may be
ineffective or harmful.

We believe that the GeneExpress database suite is the
worlds largest reference set of gene expression information
 and that it enables our customers to exploit the power of gene
expression information to reduce the time, risk and cost involved
 in their product development efforts.

Our Strategy

Our goal is to be the worlds leading source of gene
expression information. The key elements of our strategy are to:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Market our Database Information and Data Management System to
	the Global Pharmaceutical, Healthcare and Life Science
	Industries.We market our gene expression database products
	to a variety of customers that require different levels of
	information and support depending upon their gene expression data
	 needs. Initially, we are marketing full-access subscriptions to
	our GeneExpress database suite to the global pharmaceutical
	industry and large biotechnology companies for use in their drug
	discovery, development and commercialization efforts. We also
	market less expensive subscriptions to versions of the
	GeneExpress database suite, which we call data marts,
	 to smaller biotechnology companies and academic research centers
	 for specific product development or research applications. We
	will also continue to develop custom gene expression databases as
	 requested by major customers, for which we expect to earn
	database access fees, and may earn milestone and royalty payments
	 as products are developed and commercialized using our data. We
	have built and are continually expanding our data management and
	storage capabilities to provide our customers with a
	comprehensive genomics data management system that enables them
	to manage their own data as well as access ours.
|
| |  | Expand Our Gene Expression Databases to Build the Worlds
	 Most Comprehensive Gene Expression Resource.We are
	continually expanding the breadth and depth of our gene
	expression information with the intent of maintaining the
	GeneExpress database suite as the largest and most comprehensive
	gene expression database in the world. At the end of 1999, the
	database contained gene expression profiles on over 1,000 tissue
	samples representing more than 30 million gene expression
	data points. By the end of 2003, we expect to have complete
	profiles on 30,000 tissue samples representing an estimated
	3 billion gene expression data points. As part of this
	strategy, we have expanded our biorepository network to ensure a
	growing supply of tissue samples.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Enhance Functionality of Our Software to Add Further Value to
	Our Data Content.We introduced the first version of our
	GeneExpress database suite in November 1999 and plan to
	introduce the new version of GeneExpress, GeneExpress 2000, in
	the second quarter of 2000. Planned upgrades include expansion of
	 the GeneExpress Index and enhanced data-analysis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | algorithms and other tools. We also expect to release additional
	enhancements to our GeneExpress database in the second half of
	2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Include Other Types of Biological Data in Our Databases.
	GeneExpress 2000 will enable customers to manage DNA sequence,
	cDNA microarray and quantitative PCR information which is
	complementary to the core gene expression information we provide.
	 Future versions will include, for example, single nucleotide
	polymorphism, or SNP, and protein expression profile information.
	 Because we have designed our databases with leading-edge
	functionality, we believe that we will be able to readily
	generate and/or incorporate such data either into our existing
	products or into separate, specialized databases and become a
	source of an increasingly broad range of information.
|
| |  | Leverage Our Internet Distribution Channel to Earn Additional
	e-Commerce Revenues.We intend to use the Internet
	distribution channels established to deliver our database
	information to sell other products to our database subscribers.
	We also intend to build promotional and transactional revenue
	streams derived from sales of third party products to our
	installed customer base. We believe that if we develop a
	respected Internet portal for genomics and research products, we
	will be able to sell a number of research products to our current
	 customers, as well as new potential customers such as physicians
	 and patients.                                            

Our Products

We generate the gene expression data in our own laboratories from
 tissues we collect through our biorepository network using two
complementary technologies  the GeneChip microarrays
produced by Affymetrix Inc. and our own proprietary READS gene
expression technology. The GeneChips currently provide
quantitative expression levels for approximately 40,000 human
genes for which either full or partial sequences are known.
During 2000, we expect that this number will grow significantly
as Affymetrix releases new GeneChip microarrays. Currently
GeneChip microarrays are also available for 19,000 mouse and
24,000 rat genes and we use these to profile experimental animals
 and disease models and in toxicology studies. Our READS
technology does not depend on any prior knowledge of gene
sequence, is applicable to all animal types, and is extremely
sensitive. We use READS to determine the expression levels of
novel genes that are not represented on the GeneChip microarrays
and genes that are expressed at low abundance. The combination of
 GeneChip microarrays and READS enables us to obtain
comprehensive coverage of the genes expressed in virtually all
important tissue types.

The GeneExpress Database Suite

The content of the GeneExpress database suite is organized into
three modules:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The BioExpress databaseallows subscribers to use gene
	expression information to study normal physiology, elucidate the
	mechanisms of disease, identify disease-associated pathways and
	select and prioritize potential drug targets. This database
	represents a survey of gene expression in a broad range of normal
	 and diseased human tissues, tissues from experimental animals
	and also human and animal cell lines. We are also building more
	in-depth profiles of samples specifically related to therapeutic
	areas in which the pharmaceutical industry spends the majority of
	 its research dollars. These include central nervous system (or
	CNS), oncological and cardiovascular disease, diabetes,
	osteoporosis and inflammatory and immunological diseases.                                                                                                                                            
|
| |  | The ToxExpress databasecontains gene expression profiles
	produced by drugs and other compounds associated with known
	classes of toxicity in the organs typically subject to such toxic
	 effects, like the liver. These toxicity profiles can be used as
	references against which new drug leads can be screened to assess
	 their toxic potentials. Screening early in the drug discovery
	and development process allows researchers to potentially reject
	compounds having unacceptable toxicity profiles before incurring
	the substantial expenses of traditional animal toxicology studies
	 and clinical trial failures. We also have cases which indicate
	that gene expression profiling may predict human toxicity where
	traditional animal toxicity screening failed to reveal such
	effects. The database currently contains gene expression data
	from liver tissue from experimental animals treated in vivo

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | at various dosages for varying time periods and primary rat and
	human hepatocytes treated in vitro. During 2000, we intend
	 to expand the database to include toxicity profiles in CNS
	tissues, bone marrow, kidney and heart tissue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | The PharmExpress databaseis analogous to the ToxExpress
	database and contains gene expression profiles produced by a wide
	 range of marketed drugs across many human and animal tissue
	samples. Subscribers can use this information to analyze
	mechanisms of drug action at the molecular level, to re-engineer
	compounds to have more specific effects and, potentially, to
	identify new indications for existing products. At the end of
	1999, there were approximately 400 drugs represented in the
	database. We expect that the content of the PharmExpress database
	 will grow in parallel with the number of tissue samples accrued
	and processed. During 2000, we will also profile important
	categories of drugs in experimental animals in vivoand in
	 cellular systems in vitroat a range of dosages and
	treatment periods.

For each human sample in the GeneExpress suite, there is a
variety of associated information, including biographical data,
clinical history and diagnosis, laboratory values, medication
history, drug treatment outcomes and social and family histories.
 Experimental animal samples are annotated with the details of
the applicable experimental protocols, such as types and
durations of treatments. This information can be used to define
the samples that are relevant to specific biological questions. A
 user of our database conducting an electronic experiment begins
by constructing a sample set relevant to the query, choosing
among more than 150 attributes to define the set. For example,
one might select all normal liver samples from males aged 20 to
50 years who have normal serum cholesterol levels and are
not taking medications and compare this set with those having
elevated cholesterol, as shown in Figure 1, which is
representative of a sample search page of the database.

Figure 1

[HUMAN SAMPLE SEARCH GRAPHIC]

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Within such a comparison a user could decide to look at all the
genes or any subset, defined again by a wide choice of
attributes. For example, one could choose only genes encoding a
certain family of enzymes or all the genes on chromosome 22, as
shown in Figure 2.

Figure 2

[SEQUENCE BLAST QUERY GRAPHIC]

The results of these queries may be displayed in many ways. For
instance, they may, at the click of a button, be exported to
sophisticated visualization and statistical analysis packages, or
 automatically mapped to the biological pathways with which they
are associated, as shown in Figure 3.

Figure 3

[C4-DICARBOXYLIC ACID CYCLE GRAPHIC]

The GeneExpress database suite also incorporates the GeneExpress
Index, which serves as the link between the genes identified by a
 query and comprehensive information available about those genes
from publicly available sources and our own proprietary
annotations. This includes sequences and sequence clusters, gene
homologies, gene classification and gene family data, gene
function and pathway maps, chromosome location, single nucleotide
 polymorphism, or SNP, information, protein structures and
relevant medical and scientific literature. These data sources
are refreshed weekly. By selecting among

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Figure 4

[KNOWN GENE NAME GRAPHIC]

In December 1999, we entered into our first subscription
agreement for the GeneExpress database suite with Therapeutic
Genomics, Inc. By February 2000, we had entered into two
additional subscription agreements, and expect to enter into
additional subscription agreements for our GeneExpress database
suite of products in the near future.

During 2000, we plan to introduce enhanced features and
functionality in versions of our database. We expect to release
GeneExpress 2000 in the second quarter of 2000. Among the
enhanced features and functionality of GeneExpress 2000 is
expansion of the GeneExpress Index to include rat and mouse
sequences with associated homology links to human sequences.
Also, GeneExpress 2000 will include a feature, which we call an
electronic Northern blot, that allows profiling of a
gene across multiple tissues at a single click. In addition, we
expect GeneExpress 2000 to provide enhanced algorithms for
clustering and statistical analysis, multiple new visualization
tools and a pathway constructor that allows users to define their
 own proprietary biological pathways based on their discoveries.
We also expect to release additional enhancements to our
GeneExpress database in the second half of 2000.

Custom Databases and Software Products

Gene Logic has been developing customized databases tailored to
specific customers internal programs and needs since 1997.
We currently have 12 customers for our custom gene expression and
 other genomic databases and data management software. Eleven are
 major pharmaceutical and life science technology companies and
one is a major agricultural company. Five of these agreements
provide us with various technology and database access fees,
research funding and upfront payments. These five agreements also
 provide for additional payments upon attainment of research and
product development milestones and royalty payments based on
sales of any products that result from use of our technology or
proprietary database information. We also have an agreement with
a pharmaceutical company for the development of a database for
predicting drug toxicity. Under that agreement, we may license
the database

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The following table summarizes our relationships with our current
 custom database and bioinformatics software customers:

|                                                                 |                                    |            |  |            |  |                |   |              |   |  |                                                       
|---------------------------------------------------------------- | ---------------------------------- | ---------- |  | ---------- |  | -------------- | - | ------------ | - |  | ------------------------------------------------------
|                                                                
|                                                                
|                                                                 |                                    | Date of    |  | Custom     |  | Bioinformatics |   |             
|Customer                                                         |                                    | Initiation |  | Databases  |  | Software       |   | Applications
|                                                                
|                                                                
|                                                                 | Procter & Gamble Pharmaceuticals   |            |  | May 1997   |  |                | X |              |   |  | Drug discovery for heart failure and osteoporosis     
|                                                                
|                                                                 | Japan Tobacco                      |            |  | Sept. 1997 |  |                | X |              |   |  | Drug discovery for renal and other diseases           
|                                                                
|                                                                 | Organon(1)                         |            |  | Dec. 1997  |  |                | X |              |   |  | Drug discovery for fertility and psychiatric disorders
|                                                                
|                                                                 | Wyeth-Ayerst Laboratories(2)       |            |  | June 1998  |  |                | X |              |   |  | Predictive toxicology                                 
|                                                                
|                                                                 | Aventis CropScience                |            |  | June 1998  |  |                | X |              |   |  | Identification of genes for agricultural products     
|                                                                
|                                                                 | Merck & Co.                        |            |  | Sept. 1998 |  |                | X |              |   |  | Clinical trial profiling                              
|                                                                
|                                                                 | SmithKline Beecham                 |            |  | Sept. 1998 |  |                |   |              | X |  | Custom database development                           
|                                                                
|                                                                 | Schering Plough Research Institute |            |  | Sept. 1998 |  |                | X |              |   |  | Clinical trial profiling                              
|                                                                
|                                                                 | Aventis                            |            |  | Sept. 1998 |  |                | X |              |   |  | Clinical trial profiling                              
|                                                                
|                                                                 | PE Biosystems                      |            |  | Mar. 1999  |  |                |   |              | X |  | Custom database development                           
|                                                                
|                                                                 | UCB Pharma                         |            |  | Sept. 1999 |  |                | X |              |   |  | Drug discovery for asthma and allergies               
|                                                                
|                                                                 | Fujisawa Pharmaceutical            |            |  | Dec. 1999  |  |                | X |              |   |  | Proprietary and reference drug profiling for diabetes 
|                                                                
|(1) A unit of Akzo Nobel(2) A division of American Home Products
|                                                                

Market Segments

Since release of the first commercial version of the GeneExpress
database suite in November 1999, our sales and marketing
efforts have concentrated principally on the largest
pharmaceutical companies. We are expanding our marketing group
and hiring field specialists to service what we see as rapidly
increasing interest in, and demand for, our products from this
first target market. Because of the flexible, modular nature of
the GeneExpress database suite, we also plan to create smaller,
less expensive databases, which we call data marts, containing
segments or versions of the data from GeneExpress which we
believe will make our products more accessible to potential
customers lacking the resources of the largest pharmaceutical
companies. Accordingly, during 2000, we will broaden our
marketing efforts to include other market segments; specifically,
 we are assembling sales teams to focus on the smaller
pharmaceutical, biotechnology and diagnostic sectors. In
addition, we may establish relationships with several major

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The following table summarizes our business and marketing
strategy for these market segments:

|                                                                         |  |                                                                                                           |  |                          |  |                                                                                                    |                                                                                                                                   
|------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | -------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------
|                                                                        
|                                                                        
|Market Segment                                                           |  | Revenue Model                                                                                             |  | Customer Access          |  | Additional Revenue Opportunities                                                                  
|                                                                        
|                                                                        
|Largest Pharmaceutical and Biotechnology Companies                       |  | Annual subscription to full GeneExpress database suite                                                    |  | Internet In-house server |  | Products:   Custom databases   Custom chips
	  Software e-Commerce:   Research reagents           
|                                                                        
|Other Pharmaceutical and Biotechnology Companies                         |  | Annual subscription to target gene expression data marts                                                  |  | Internet In-house server |  | Products:   Custom databases   Custom chips
	  Software e-Commerce:   Research reagents           
|                                                                        
|Academic Research                                                        |  | Inexpensive basic data/ subscription access to specialized gene
	expression data marts                    |  | Internet                 |  | Products:   Custom chips e-Commerce:
	  Research reagents                                         
|                                                                        
|Diagnostic Companies                                                     |  | Annual subscription to full GeneExpress database suite Annual
	subscription to gene expression data marts |  | Internet In-house server |  | Products:   Custom databases   Diagnostic
	chips   Software e-Commerce:   Specialized
	gene probes
|                                                                        
|Clinical Research Organizations                                          |  | Annual subscription to clinical gene expression data marts                                                |  | Internet In-house server |  | Products:   Custom databases   Custom chip
	  Software                                            
|                                                                        
|Biomedical Companies Targeting Physicians and Patients Via the
	Internet |  | Promotional, advertising and transaction-based revenues from
	biomedical and other companies              |  | Internet                 |  |                                                                                                    | e-Commerce:   Pharmaceutical promotion:  to
	physicians  direct-to-consumer e-Health
	direct-to-consumer Specialized diagnostics
|                                                                        

Core Processes Used to Create Our Databases

To build our gene expression information products we have
developed quality-controlled and quality-assured processes by
which we acquire the appropriate human and animal tissues samples
 and related information and enter them into our biorepository,
measure the level of gene expression in the samples under
standardized conditions and manage, analyze and distribute to
customers the massive amounts of resulting data.

Biorepository

Over the past three years, we have established an international
network of clinical centers where we have agreements to collect
human tissue samples. We believe this established network
provides us with a significant competitive advantage because it
has enabled us to acquire comprehensive data and gives us what we
 believe is superior access to tissue samples for genomic
analysis purposes. The network currently

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At each center we have approvals and patient informed consent
processes in place allowing us free and clear use of the tissues
and related information. Tissues are obtained directly from the
operating rooms according to protocols we have established to
preserve their quality and shipped to our headquarters together
with extracts from the clinical records. To obtain normal and
treated experimental animal tissues, we have contracted with a
clinical research organization that specializes in this area. At
our facilities, every human and animal sample undergoes rigorous
quality control and examination by a board-certified pathologist
on our staff before accession into the biorepository. The process
 includes taking photomicrographs of each sample which are
captured in the GeneExpress database suite and may be examined by
 users. As a result, there exists a complete audit trail from the
 clinical center to entry into the database. We have also set up
a laser capture micro-dissection unit to allow us to separate
certain complex tissues into their constituent cell types, each
of which may then be analyzed independently.

As of December 31, 1999, we had accrued over 3,000 human
tissues samples, approximately one-third being normal and
two-thirds diseased, and 4,000 experimental animal samples in the
 biorepository. Our human tissue collection contains at least
five samples from each of the major organ systems, because we
believe multiple samples helps assure statistical accuracy and
account for aberrational samples and inter-individual variation.
By the end of 2000, our goal is to have 20 samples of each organ
type. The animal samples consist of tissues from normal rats and
mice and animals that have been treated with drugs of interest
for the ToxExpress and PharmExpress databases. We have also
collected tissues from experimental animal disease models and
cell lines that are widely used in drug discovery research.

Gene Expression Data Production

The expression levels of the genes in each sample is measured
using Affymetrix GeneChip microarrays. The current GeneChip set
comprises five glass chips to which are attached small pieces of
DNA from 5,600 full-length genes and 35,000 gene fragments. We
expect that these numbers will be significantly expanded during
2000 and eventually cover the entire human genome. Our agreement
with Affymetrix requires Affymetrix to supply us with GeneChip
microarrays on a nonexclusive basis and provides us with price
concessions, quality assurances and negotiated delivery
requirements, which we believe give us an advantage not shared by
 other companies using gene expression technologies for
commercial purposes.

Fluorescent-labeled DNA sequences from a tissue sample bind to
their complements on the GeneChip array. By detecting the
positions of the fluorescent spots on the chip, researchers can
determine which genes were expressed in the sample. The
brightness of the spot represents a precise, quantitative measure
 of the level of expression of the gene. This measure is
permanently stored and can be compared across all the samples in
the GeneExpress database suite. Currently GeneChip microarrays
are also available for 19,000 mouse and 24,000 rat genes and we
use these to profile experimental animals and disease models and
in toxicology studies.

GeneChip microarrays are capable of measuring the expression
levels of only those genes for which sequence information is
available and for which probes have been placed on the chips.
Currently, this number is approximately 40,000, but we expect the
 capacity of the chips will be expanded during 2000. In order to
obtain comprehensive coverage of all the genes expressed in
important tissue types, we use our patented READS technology. The
 READS process does not depend on any prior knowledge of gene
sequence, is applicable to all animal types, and is extremely
sensitive. We use READS to determine the expression levels of
novel genes that are not represented on the GeneChip microarrays
and genes that are expressed at low abundance.

The protocols and procedures we have developed for tissue accrual
 and for running both GeneChip microarrays and the READS process
have been highly automated and validated. We conduct regular

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Our current production capacity is 400 samples, a throughput of
2,000 GeneChip microarrays, per month. During 2000, we expect to
increase production to 800 samples per month. By
December 2000, we expect to be adding approximately
50 million gene expression data points to the GeneExpress
database suite every month.

Data Management, Analysis and Distribution

The production process generates very large amounts of gene
expression data, which must be managed effectively and integrated
 with data from subscribers in-house databases and a
growing number of public domain genomic and medical databases
available on the Internet. These various databases often have
different, incompatible structures, but our proprietary Object
Protocol Model, or OPM, data management software allows us and
our customers to manage, integrate, and query them as if they
were part of a single database. A major advantage of OPM is that
it is easier to use for genomic applications than conventional
database management software. Using OPM, a bioinformatics
specialist can view the structure of the underlying database on a
 computer screen and interact with it by pointing and clicking.
Therefore, OPM software allows expert users to rapidly customize
their version of the GeneExpress database suite.

The GeneExpress database suite consists of three inter-related
data sets  the biological descriptions of the tissue
samples and the associated clinical data, the quantitative
measurements of gene expression in the samples, and the
GeneExpress Index  contained within an open Oracle 8.1
 data warehouse core. Running on top of the data warehouse,
through a structure known as a run-time engine, is a
layer of analysis applications. These applications allow a user
to define sample and gene sets and to generate extensive reports
about the genes expressed in the samples within the data
warehouse. As examples, a user can ask for a:



| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | gene signature  the genes that are consistently
	expressed in samples of a given tissue type;                                                                               
|
| |  | gene signature differential  how gene expression
	changes from one type of sample to another, for example, from a
	normal tissue to its diseased state;                     
|
| |  | gene fold-change report  a quantification of changes,
	for instance, from a normal to a diseased tissue, or from various
	 tissues across stages of disease progression; and
|
| |  | cluster tree report  a clustering of genes into
	functional pathways based on similar patterns in their gene
	expression profiles.                                          

Then, through the GeneExpress Index, the user can call up
comprehensive on-screen reports on any or all of the genes of
interest.

From their desktops, users of the GeneExpress database suite log
on over secure Internet connections to servers located at Gene
Logics main computer facility. This brings them to a
user-friendly Web interface inside their browsers. Each page
offers them a variety of choices for searching the database and
analyzing the data. The results may be saved in a dedicated
workspace management area and may be shared with other members of
 a team or workgroup anywhere in the world. Over time, the users
in a major pharmaceutical company can construct and save the
results of thousands of electronic experiments, such as normal
gene expression profiles of important cell and tissue types,
comparisons of diseased versus normal samples, animals versus
human, pathway maps and sets of valuable patient data, and
integrate these information sets into their discovery and
development programs. We believe that with each use of these
growing sets of legacy information, the value of the database to
its users is increased, strengthening customer loyalty.

Flow-thru Chip Probe Arrays

The GeneExpress database suite allows a researcher to rapidly
identify a subset of genes that may be relevant to a specific
disease, research program or drug discovery effort. The next step
 is to be able to

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To fill this market need, we have developed and received patents
on a three-dimensional chip technology, called the Flow-thru
Chip. The Flow-thru Chip is a glass or silicon wafer traversed by
 hundreds of thousands of discrete microscopic channels. Probes
for the subset of genes of interest are attached to the inner
surfaces of these channels, and molecules from the samples to be
tested flow through the channels, coming into close proximity
with the probes, thus facilitating binding.

The Flow-thru Chip offers several features that make it
well-suited to high throughput applications:



| |   |                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Speed.The small channels create a reaction vessel,
	causing molecules from the samples to bind rapidly to their
	complementary probes.                                                                                                                                                                                          
|
| |  | Sensitivity.Because of its three-dimensional structure,
	the Flow-thru Chip has greater surface area for attachment of
	probes than conventional flat chips. This allows detection of
	smaller quantities of molecules.                                                                                                         
|
| |  | Cost.The process by which the Flow-thru Chips are
	manufactured is simple and cost-effective for smaller quantities
	as compared to high-density chips.                                                                                                                                                                         
|
| |  | Versatility.The close proximity of probes and sample
	molecules may facilitate, in addition to the binding of DNA to
	DNA, a wide range of other reactions. For example, the Flow-thru
	Chip may be useful in analyzing interactions between two
	proteins, between proteins and DNA, or between proteins and small
	 molecules.

Although we will continue to use the Flow-thru Chip internally,
Gene Logic does not itself intend to manufacture and market the
Flow-thru Chip for commercial sale. We are currently in
discussions with third parties to establish commercialization
partnerships through which we could receive technology transfer
payments and profit-sharing or royalties on Flow-thru Chip sales.

Intellectual Property

We seek United States and international patent protection for
major components of our technology platform, including elements
of our READS, Flow-thru Chip and bioinformatic technologies. We
also rely on trade secret protection for certain of our
confidential and proprietary information, and we use license
agreements both to access external technologies and assets and to
 convey certain intellectual property rights to others. Our
commercial success will be dependent in part on our ability to
obtain commercially valuable patent claims and to protect our
intellectual property portfolio.

As of December 31, 1999, we had exclusive rights to 13
issued patents, 11 of which are United States patents, and 62
patent applications, 47 of which are United States patent
applications, relating to our technologies. We have exclusive
rights to United States patents covering key aspects of READS
gene expression analysis, gene expression analysis using
restriction enzymes, and the Flow-thru Chip technology.

The patent positions of pharmaceutical, biopharmaceutical and
biotechnology companies, including ours, are generally uncertain
and involve complex legal and factual questions. Our business
could be hurt by any of the following:



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | the pending patent applications to which we have exclusive rights
	 may not result in issued patents;
|
| |  | the claims of any patents which are issued may not provide
	meaningful protection;                   
|
| |  | we may not be successful in developing additional proprietary
	technologies that are patentable;     

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| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | patents licensed or issued to us or our customers may not provide
	 a basis for commercially viable products or provide us with any
	competitive advantages and may be challenged by third parties;
	and
|
| |  | others may have patents that relate to our technology or
	business.                                                                                                                                     

In addition, patent law relating to the scope of claims in the
technology field in which we operate is still evolving. The
degree of future protection for our proprietary rights,
therefore, is uncertain. Furthermore, others may independently
develop similar or alternative technologies, duplicate any of our
 technologies, and if patents are licensed or issued to us,
design around the patented technologies licensed to or developed
by us. In addition, we could incur substantial costs in
litigation if we are required to defend ourselves in patent suits
 brought by third parties or if we initiate such suits.

We are aware of a number of United States patents and patent
applications and related foreign patents and patent applications
owned by third parties relating to the analysis of gene
expression or the manufacture and use of DNA probe arrays. These
other technologies may provide third parties with competitive
advantages over us and may hurt our business. In addition, third
party patent applications contain broad claims, and it is not
possible to determine whether or not such claims will be narrowed
 during prosecution and/or will be allowed and issued as patents,
 even if such claims appear to cover prior art or have other
defects. An owner or licensee of a patent in the field may
threaten or file an infringement action and we may or may not
prevail in any such action. The cost of defending an infringement
 action may be substantial, which could significantly increase
our expenses and increase our losses. Furthermore, required
licenses may not be made available on commercially viable terms,
if at all. Failure to obtain any required license could prevent
us from utilizing or commercializing one or more of our
technologies.

We have applied, and intend to make additional applications, for
patent protection for methods relating to gene expression, for
the disease-specific patterns of gene expression we identify and
for the individual disease genes and targets we discover. Such
patents may include claims relating to novel genes and gene
fragments and to novel uses for known genes or gene fragments
identified through our discovery programs. We may not be able to
obtain meaningful patent protection for our discoveries; even if
patents are issued, the scope of the coverage or protection they
would afford is uncertain. Failure to secure such meaningful
patent protection would endanger our competitive position.

Several groups are attempting to identify and patent gene
fragments and full-length genes, the functions of which have not
been characterized, as well as fully characterized genes. There
is substantial uncertainty regarding the possible patent
protection for gene fragments or genes without known function or
correlation with specific diseases. To the extent any patents
issue to other parties on such partial or full-length genes, the
risk increases that our potential products and processes and
those of our customers may give rise to claims of patent
infringement. The public availability of partial or full sequence
 information or the existence of patent applications related
thereto, even if not accompanied by relevant function or disease
association, prior to the time we apply for patent protection on
a corresponding gene could hinder our ability to obtain patent
protection with respect to such gene or to the related expression
 patterns. Furthermore, others may have filed, and in the future
are likely to file, patent applications covering genes or gene
products that are similar, or identical to, any for which we may
seek patent protection. These patent applications may have
priority over patent applications filed by us. Any legal action
against us or our customers claiming damages and seeking to
enjoin commercial activities relating to the affected products
and processes could, in addition to subjecting us to potential
liability for damages, require us and our customers to obtain a
license in order to continue to manufacture or market the
affected products and processes. We and our customers may not
prevail in any such action and any license required under any
patent may not be available on commercially acceptable terms, if
at all. We believe that there is likely to be significant
litigation in the industry regarding patent and other
intellectual property rights. If we become involved in such
litigation, it could consume a substantial portion of our
managerial and financial resources and negatively impact our
financial results.

Enactment of legislation implementing the General Agreement on
Tariffs and Trade has resulted in certain changes to United
States patent laws that became effective on June 8, 1995.
Most notably, the term of patent protection for patent
applications filed on or after June 8, 1995 is no longer a
period of 17

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With respect to proprietary know-how that is not patentable and
for processes for which patents are difficult to enforce, we rely
 on trade secret protection and confidentiality agreements to
protect our interests. We believe that several elements of our
drug discovery system involve proprietary know-how, technology or
 data that are not covered by patents or patent applications. In
addition, we have developed a proprietary index of gene and gene
fragment sequences which we update on an ongoing basis. Some of
this data will be the subject of patent applications, whereas
other data will be maintained as proprietary trade secret
information. We have taken security measures to protect our
proprietary know-how and technologies and confidential data and
continue to explore further methods of protection. While we
require all employees, consultants and customers to enter into
confidentiality agreements, we cannot be certain that proprietary
 information will not be disclosed, that others will not
independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade
secrets, or that we can meaningfully protect our trade secrets.
In the case of arrangements with our customers that require the
sharing of data, our policy is to make available to our customers
 only such data as is relevant to our agreements with such
customers, under controlled circumstances, and only during the
contractual term of those agreements, and subject to a duty of
confidentiality on the part of our customer. However, such
measures may not adequately protect our data. Any material leak
of confidential data into the public domain or to third parties
may cause our business, financial condition and results of
operations to be harmed.

We are a party to various license agreements that give us rights
to use technologies and biological materials in our research and
development processes. We may not be able to maintain such rights
 on commercially reasonable terms, if at all. Failure by us to
maintain such rights could harm our business.

Competition

Competition among entities attempting to identify the genes
associated with specific diseases and to develop products based
on such discoveries is intense. We face, and will continue to
face, competition from pharmaceutical, biotechnology and
diagnostic companies, academic and research institutions, and
government agencies, both in the United States and abroad.
Several entities are attempting to identify and patent randomly
sequenced genes and gene fragments, while others are pursuing a
gene identification, characterization and product development
strategy based on positional cloning. We are aware that certain
entities, including Incyte Pharmaceuticals, Inc. and the Celera
Genomics Group of PE Corporation, are using a variety of gene
expression analysis methodologies, including the use of
chip-based systems, to attempt to identify disease-related genes.
 In addition, numerous pharmaceutical companies are developing
genomic research programs, either alone or in partnership with
our competitors. Competition among such entities is intense and
is expected to increase. In order to compete against existing and
 future technologies, we will need to demonstrate to potential
customers that our technologies and capabilities are superior to
competing technologies.

Some of our competitors have substantially greater capital
resources, research and development staffs, facilities,
manufacturing and marketing experience, distribution channels and
 human resources than we do. These competitors may discover,
characterize or develop important genes, drug targets or drug
leads, drug discovery technologies or drugs in advance of us or
our customers or which are more effective than those developed by
 us or our customers, or may obtain regulatory approvals of their
 drugs more rapidly than we do or our customers do, any of which
could have a material adverse effect on any of our similar
programs. Moreover, our competitors may obtain patent protection
or other intellectual property rights that could

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We will rely on our customers for support of certain of our
discovery programs and intend to rely on our customers for
preclinical and clinical development of related potential
products and the manufacturing and marketing of these products.
Each of our customers is conducting multiple product development
efforts within each disease area that is the subject of its
agreement with us. Generally, our agreements with customers do
not preclude the customer from pursuing development efforts
utilizing approaches distinct from that which is the subject of
our agreement with them. Any of our product candidates,
therefore, may be subject to competition with a potential product
 under development by a customer.

Future competition will come from existing competitors as well as
 other companies seeking to develop new technologies for drug
discovery based on gene sequencing, target gene identification,
bioinformatics and related technologies. In addition, certain
pharmaceutical and biotechnology companies have significant needs
 for genomic information and may choose to develop or acquire
competing technologies to meet such needs. Our agreement with
Affymetrix provides us with nonexclusive access to GeneChip probe
 arrays for our use in generating gene expression databases for
license to multiple third parties and custom databases for
license to a single third party. Accordingly, our competitors
could obtain licenses to use GeneChip probe arrays to develop
their own gene expression databases for internal use or may use
other technologies to develop competitive products and services.

Genomic technologies have undergone and are expected to continue
to undergo rapid and significant change. Our future success will
depend in large part on maintaining a competitive position in the
 genomics field. Rapid technological development by us or others
may result in products or technologies becoming obsolete before
we recover the expenses we incur in connection with our
development. Products offered by us could be made obsolete by
less expensive or more effective drug discovery technologies,
including technologies that may be unrelated to genomics. We may
not be able to make the enhancements to our technology necessary
to compete successfully with newly emerging technologies.

Government Regulation

Regulation of Drug Development and
Commercialization

We do not plan to conduct clinical trials in humans or
commercialize therapeutic products discovered as a result of our
gene, drug target and drug lead discovery programs but intend to
rely on our customers to conduct such activities. Any new drug
developed by the efforts of our customers as a result of their
use of our GeneExpress database suite or other products must
undergo an extensive regulatory review process in the United
States and other countries before it can be marketed. This
regulatory process, which includes preclinical studies and
clinical trials, and may include post-marketing surveillance of
each compound to establish its safety and efficacy, can take many
 years and require the expenditure of substantial resources. Data
 obtained from preclinical studies and clinical trials are
subject to varying interpretations that could delay, limit or
prevent marketing. Delays or rejections may also be encountered
based on changes in United States Food and Drug Administration
policies for drug review during the period of product development
 and FDA regulatory review of each submitted new drug
application, or NDA, in the case of new pharmaceutical agents, or
 product license application, or PLA, or biologics license
application, or BLA, in the case of biological therapeutics.
Delays may also be encountered in the regulatory review of any
diagnostic or agricultural product, where such review is
required, and in obtaining regulatory clearance in foreign
countries. Delays in obtaining marketing clearance could delay
the commercialization of any drugs or diagnostic or agricultural
products developed by our customers, impose costly procedures on
our customers activities, diminish any competitive
advantages that our customers may attain and lessen our potential
 royalties.

Even if regulatory clearance is obtained, a marketed product and
its manufacturer are subject to continuing review. Discovery of
previously unknown problems with a product may result in
withdrawal of the product from the market.

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| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | the FDAs delay in granting marketing clearance or refusal
	to grant marketing clearance of a product;
|
| |  | withdrawal of a product from the market; or                                                           
|
| |  | the imposition of criminal penalties against the manufacturer and
	 NDA, PLA or BLA holder.           

No product resulting from the use of our databases has been
released for commercialization in the United States or elsewhere.
 In addition, no investigational new drug application has been
submitted for any such product candidate. We expect to rely on
our customers to file such applications and generally direct the
regulatory review process. We cannot be certain if or when our
customers will submit an application for regulatory review, or
whether our customers will be able to obtain marketing approval
for any products on a timely basis, if at all. If our customers
fail to obtain required governmental approvals, it will prevent
us from marketing drugs or diagnostic products. The occurrence of
 any of these events may cause our business, financial condition
and results of operations to suffer.

Regulation of Use of Human Tissue

Our access to and use of human or other tissue samples in the
expansion of our GeneExpress database suite and the creation of
custom databases may become subject to government regulation,
both in the United States and abroad. U.S. and foreign government
 agencies may also impose restrictions on the use of data derived
 from human or other tissue samples. If our access to or use of
human tissue samples, or our customers use of data derived
from such samples, is restricted, our business will suffer.

Environmental Regulation

Our research and development activities in some cases involve the
 controlled use of biological and other hazardous materials,
chemicals and various radioactive materials. We are subject to
federal, state and local laws and regulations governing the use,
storage, handling and disposal of such materials and certain
waste products. The risk of accidental contamination or injury
from these materials cannot be eliminated. In the event of an
accident, we could be held liable for any damages that result,
and any liability could exceed our resources. Other than such
laws and regulations governing the generation, use and disposal
of hazardous materials and wastes, and limiting workplace
exposures to these materials, we do not believe our current and
proposed activities are subject to any specific government
regulation other than regulations affecting the operations of
companies generally.

Regulation of the Internet

There is an increasing body of law and regulation pertaining to
the Internet. In addition, a number of legislative and regulatory
 proposals are under consideration by federal, state, local and
foreign governments and agencies. Laws or regulations may be
adopted with respect to the Internet relating to liability for
information retrieved from or transmitted over the Internet,
on-line content regulation, user privacy, taxation and quality of
 products and services. Moreover, it may take years to determine
whether and how existing laws such as those governing issues such
 as intellectual property ownership and infringement, privacy,
copyright, trademark, trade secret, taxation and the regulation
of the sale of other specified goods and services apply to the
Internet. The requirement that we comply with any new legislation
 or regulation, or any unanticipated application or
interpretation of existing laws, may decrease the growth in the
use of the Internet, which could in turn decrease the demand for
our products, increase our cost of doing business or otherwise
have a material adverse effect on our business, results of
operations and financial condition.

Due to the global reach of the Internet, it is possible that,
although our transmissions over the Internet originate primarily
in the State of Maryland, the governments of other states and
foreign countries

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Employees

As of December 31, 1999, we had 176 full-time employees, 57
of whom hold doctoral degrees and 36 of whom hold other advanced
degrees. Of these, 148 were engaged in research and development,
including bioinformatics, and 28 were engaged in business
development, finance, and general administration. None of our
employees is represented by a labor union or covered by a
collective bargaining agreement. We have not experienced any work
 stoppages and consider our relations with our employees to be
good. Our future success depends in significant part on the
continued service of our key scientific, technical and senior
management personnel and our continuing ability to attract and
retain highly qualified technical and managerial personnel. There
 is intense competition for such qualified personnel in the areas
 of our activities and we may not be able to continue to attract
and retain the personnel necessary for the development of our
business. Failure to attract and retain key personnel could cause
 our business, financial condition and results of operations to
be harmed.

Management

Our executive officers and directors, and their ages and
positions as of March 30, 2000, are as follows:

|                                |  |     |    |          |  |                                                               
|------------------------------- |  | --- | -- | -------- |  | --------------------------------------------------------------
|Name                            |  | Age |    | Position
|                                |  |     |    |         
|Michael J. Brennan, M.D., Ph.D. |  |     | 42 |          |  | Chief Executive Officer and Chairman of the Board of Directors
|                               
|                               
|                               
|                               
|Mark D. Gessler                 |  |     | 38 |          |  | President, Chief Operating Officer and Director               
|                               
|                               
|                               
|                               
|Douglas Dolginow, M.D.          |  |     | 45 |          |  | Senior Vice President, Product Development                    
|                               
|                               
|                               
|                               
|Victor M. Markowitz, D.Sc.      |  |     | 47 |          |  | Senior Vice President and Chief Information Officer           
|                               
|                               
|                               
|                               
|David S. Murray                 |  |     | 53 |          |  | Senior Vice President, Marketing and Sales                    
|                               
|                               
|                               
|                               
|Philip L. Rohrer, Jr.           |  |     | 43 |          |  | Chief Financial Officer                                       
|                               
|                               
|                               
|                               
|Jules Blake, Ph.D.              |  |     | 75 |          |  | Director                                                      
|                               
|                               
|                               
|                               
|Charles L. Dimmler III          |  |     | 58 |          |  | Director                                                      
|                               
|                               
|                               
|                               
|G. Anthony Gorry, Ph.D.         |  |     | 59 |          |  | Director                                                      
|                               
|                               
|                               
|                               
|Jeffrey D. Sollender            |  |     | 40 |          |  | Director                                                      
|                               
|                               
|                               
|                               
|Alan G. Walton, Ph.D., D.Sc.    |  |     | 63 |          |  | Director                                                      

Michael J. Brennan, M.D., Ph.D., has served as our Chief
Executive Officer and as a director since December 1995 and
as Chairman of the Board of Directors since March 2000. From
 December 1995 through January 1999, Dr. Brennan
also served as our President. From October 1993 to
November 1995, he was Vice President, Business Development
for Corange International Limiteds worldwide therapeutics
business, Boehringer Mannheim Therapeutics. From June 1990
to October 1993, Dr. Brennan was a director and the
general manager of Boehringer Mannheim, South Africa.
Dr. Brennan received a Ph.D. in neurobiology and an M.D.
from the University of the Witwatersrand, Johannesburg, South
Africa. In 1985, he completed his residency in neurology at
Boston City Hospital.

Mark D. Gesslerhas served as our President and Chief
Operating Officer since January 1999 and as a director since
 March 2000. From June 1996 to October 1999,
Mr. Gessler served as our Chief Financial Officer and, from
June 1996 to January 1999, was our Senior Vice President,
Corporate Development. From February 1993 to June 1996,
 he was with GeneMedicine Inc., a gene therapy company, most

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Douglas Dolginow, M.D., has served as our Senior Vice
President, Product Development since March 2000. From
September 1998 to March 2000 he served as our Senior
Vice President, Pharmacogenomics. Dr. Dolginow served as
President and Chief Operating Officer of Oncormed Inc. from
October 1993 and as a director of Oncormed from
May 1994 until joining us. Dr. Dolginow was Vice
President of Regional Operations for Nichols Institute, a
clinical laboratory company, from May 1991 to
October 1993. From 1983 to 1991, he served as medical
director for multiple clinical laboratories including Highland
General Hospital, Oakland, California and Mt. Zion Hospital, San
Francisco, California. Since 1984, he has been an active member
of the Clinical Faculty at the University of California, San
Francisco. Dr. Dolginow received an M.D. from the University
 of Kansas.

Victor M. Markowitz, D.Sc., has served as our Senior Vice
President and Chief Information Officer since March 2000. He
 was Senior Vice President, Data Management Systems from
September 1998 to March 2000 and Vice President, Data
Management Systems from September 1997 to
September 1998. Prior to joining us, Dr. Markowitz was
a staff scientist at Lawrence Berkeley National Laboratory and
project leader in the laboratorys Data Management Research
and Development Group. He is the principal architect of the
Object Protocol Model software. Dr. Markowitz received his M.Sc.
and D.Sc. degrees in computer science from Technion, the Israel
Institute of Technology.

David S. Murrayhas served as our Senior Vice President,
Marketing and Sales, since January 2000. From 1968 until
January 2000, Mr. Murray held various positions with
Dun & Bradstreet Corporation, a business information
provider, including Executive Vice President, U.S., from 1994
until January 2000, and President, Asia/ Pacific-Latin America,
from 1991 until 1994. Mr. Murray served as Senior Vice President,
 Asia/ Pacific-Latin America, from 1990 until 1991, President,
Japan, from 1989 until 1990, and Managing Director, Hong Kong,
from 1987 until 1989. Mr. Murray holds a B.S. in business
administration from Murray State University.

Philip L. Rohrer, Jr., has served as our Chief Financial
Officer since October 1999. From May 1978 until
August 1999, Mr. Rohrer held various positions with
BioWhittaker Inc., a biotechnology supply company, including
Chief Financial Officer from 1988 until December 1992 and
again from September 1993 until August 1999. Mr. Rohrer
 served as Vice President and General Manager for Diagnostic
Products from September 1992 to September 1993.
Mr. Rohrer holds an A.B. in biology from Hood College and an
 M.S.M. from Frostburg State University.

Jules Blake, Ph.D., has served as a director of the
Company since its inception in September 1994. From 1973
until his retirement in 1989, Dr. Blake served as Vice
President of Research and Development and Vice President,
Corporate Scientific Affairs, for Colgate-Palmolive, Inc., a
consumer products company. Dr. Blake was appointed as an
Industrial Research Institute Fellow at the United States Office
of Science and Technology Policy, Executive Office of the
President, where he served until 1991. Dr. Blake serves on
the boards of directors of the public companies Martek
Biosciences Corporation and ProCyte Corporation. Dr. Blake
holds a Ph.D. in organic chemistry from the University of
Pennsylvania.

Charles L. Dimmler IIIhas served as a director of the
Company since May 1996. Mr. Dimmler has been a Managing
Director of Burrill & Company, a private merchant banking
firm specializing in the life science industries, since
January 2000. From July 1994 to December 1999,
Mr. Dimmler was an investment officer of the Cross Atlantic
Partners Funds and an operating officer of Cross Atlantic
Partners, Inc., a unit of Investec Group Investments Limited.
Since 1988, Mr. Dimmler has been a General Partner of Hambro
 International Equity Fund. He serves as a director of several
private companies. Mr. Dimmler earned his undergraduate
degree from the University of California at Davis.

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G.  Anthony Gorry, Ph.D., has served as a director of
 the Company since January 1997. Since April 1992,
Dr. Gorry has been Vice President, Information Technology
and Professor of Computer Science at Rice University. Presently
he is also Professor of Management and Director of the Center for
 Technology in Teaching and Learning at Rice. Dr. Gorry is
also a Director of the W.M. Keck Center for Computational
Biology, a joint endeavor of Rice, Baylor College of Medicine and
 the University of Houston. He directs a training grant on
computational biology funded by the National Library of Medicine.
 He is also Adjunct Professor of Neuroscience at Baylor College
of Medicine. Dr. Gorry holds a B.Eng. from Yale University,
an M.S. in chemical engineering from the University of California
 (Berkeley) and a Ph.D. in computer science from the
Massachusetts Institute of Technology. He is a Member of the
Institute of Medicine of the National Academy of Sciences and a
Fellow of the American College of Medical Informatics.

Jeffrey D. Sollenderhas served as a director of the
Company since July 1997. Mr. Sollender is a founder of and
advisor to Biotechvest L.P., a venture capital investment firm
formed in 1993. From 1994 through December 1995, Mr.
Sollender served as an advisor to Forward Ventures, a venture
capital investment firm. Mr. Sollender became a venture
partner of Forward Ventures in 1996 and a general partner in
September 1997. Mr. Sollender co-founded Triangle
Pharmaceuticals, Inc., a biopharmaceutical company, in 1995,
CombiChem Inc., a combinatorial chemistry company, in 1994 and
GenQuest, Inc., a functional genomics company, in 1995. He served
 as Vice President of Operations and Business Development for
CombiChem Inc. and GenQuest, Inc. until January 1995 and
February 1996, respectively. Mr. Sollender co-founded
AriZeke Pharmaceuticals, an oral drug delivery company, in 1997
and continues to serve as Chairman and Chief Executive Officer of
 the company. Mr. Sollender received his MBA from the
University of Chicago Graduate School of Business.

Alan G. Walton, Ph.D., D.Sc., has served as a director
since our inception in September 1994. He served as Chairman
 of the Board of Directors from September 1994 to
March 2000. Dr. Walton has been a General Partner of
Oxford Bioscience Partners, a private equity investment firm,
since 1991 and a member of the Board of Directors of
Collaborative Clinical Research since 1994 and Alexandria Real
Estate Equities, Inc., a public company, since 1998. In 1981,
Dr. Walton co-founded University Genetics Co., a public
corporation specializing in technology transfer from academic
institutions to industry and in the seed financing of
high-technology start-ups, and served as its President and Chief
Executive Officer until 1987. He has lectured extensively at
various universities, including Harvard Medical School, Indiana
University and Case Western Reserve University, where he was
Professor of Macromolecular Science and Director of the
Laboratory for Biological Macromolecules. Dr. Walton
received a Ph.D. in chemistry and a D.Sc. in biological chemistry
 from Nottingham University, England.

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Risk Factors

The following factors, among others, could cause actual
results to differ materially from those contained in the
forward-looking statements made in this Report on Form 10-K
and presented elsewhere by management.

To generate significant revenues, we must retain existing and
obtain additional database customers.

Our strategy depends on entering into agreements to provide gene
expression information products to pharmaceutical, biotechnology
and other companies. Our current customers include American Home
Products Corp.s Wyeth-Ayerst Laboratories, Aventis,
Fujisawa Pharmaceutical Co., Ltd., Japan Tobacco, Inc., Merck
& Co., Inc., N.V. Organon, a unit of Akzo Nobel NV, PE
Biosystems, Pfizer Inc., Procter & Gamble
Pharmaceuticals, Inc., Schering-Plough Corporations
Schering-Plough Research Institute, SmithKline Beecham PLC,
Therapeutic Genomics, Inc., and UCB Research, Inc., a division of
 UCB Pharma. We also have an agreement with Aventis CropScience
to build a database of gene expression for agricultural
applications. Each of the agreements that we have with our
customers is for a specific term, and some of these agreements
are terminable without penalty by our customers prior to
expiration. If any agreements are terminated or expire and are
not renewed, our business could suffer.

In addition, we must obtain new customers for our products in
order to be successful. In particular, we have only recently
commenced efforts to market our GeneExpress database suite. If we
 are unsuccessful in selling our GeneExpress database products,
our business will suffer.

Our sales cycle is lengthy and we may spend considerable
resources on unsuccessful sales efforts or may not be able to
complete deals on the schedule we anticipate.

Our ability to obtain new customers for our database products
depends upon our customers belief that our products can
help accelerate their drug discovery efforts. Our sales cycle is
typically lengthy because we need to educate our potential
customers and sell the benefits of our products to a variety of
constituencies within such companies. In addition, each agreement
 involves the negotiation of unique terms. We may expend
substantial funds and management effort with no assurance that an
 agreement will result. Actual and proposed consolidations of
pharmaceutical companies have affected, and may in the future
affect, the timing and progress of our sales efforts.

Our technologies are new and unproven and may not allow us or
our customers to develop commercial products.

Our technologies involve new and unproven approaches. They are
based on the assumption that information about gene expression
and gene sequences may help scientists better understand complex
disease processes. There is limited understanding of the roles of
 genes in these diseases. Few therapeutic products based on gene
discoveries have been developed and commercialized. Our
information and technologies may not enable us or our customers
to identify drug targets and drug leads. Even if they are
successful in identifying drug targets and drug leads based on
their discoveries made using our databases, our customers may not
 be able to discover or develop commercially viable products. To
date, no one has developed or commercialized any therapeutic,
diagnostic or agricultural products based on our technologies. If
 we fail to identify genes useful for the discovery and
development of such products, our current and potential customers
 may lose confidence in our products and company and our business
 may suffer as a result.

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Our customers may not be successful in developing or
commercializing therapeutic, diagnostic or other life science
products using our gene expression information.

Development of therapeutic, diagnostic and other life science
products based on our customers discoveries will also be
subject to other risks of failure inherent in their development
or commercial viability. These risks include the possibility that
 any such products will:



| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | be found to be toxic;                                                                                                                                           
|
| |  | be found to be ineffective;                                                                                                                                     
|
| |  | fail to receive necessary regulatory approvals;                                                                                                                 
|
| |  | be difficult or impossible to manufacture on a large scale;                                                                                                     
|
| |  | be uneconomical to market;                                                                                                                                      
|
| |  | fail to be developed prior to the successful marketing of similar
	 products by competitors; or                                                                 
|
| |  | be impossible to market because they infringe on the proprietary
	rights of third parties or compete with products marketed by
	third parties that are superior.

If our customers discover therapeutic, diagnostic or other life
science products using our custom databases, we will rely on them
 for product development, regulatory approval, manufacturing and
marketing of those products before we can realize some of the
milestone payments, royalties and other payments we may be
entitled to under the terms of some of our custom database
agreements. Our agreements with our customers typically allow the
 customers significant discretion in electing whether to pursue
any of these activities. We cannot control the amount and timing
of resources our customers may devote to our programs or
potential products. As a result, we cannot be certain that our
customers will choose to develop and commercialize such products.
 In addition, if a customer is involved in a business
combination, such as a merger or acquisition or changes its
business focus, its performance in its agreement with us may
suffer and, as a result, we may not generate any revenues from
the royalty, milestone and similar payment provisions of our
custom database agreement with that customer.

We rely on GeneChip probe arrays supplied by Affymetrix to
build our GeneExpress database suite.

Our ability to continue to build the GeneExpress database suite
will depend in part on the ability of Affymetrix to supply
adequate quantities of high quality GeneChip probe arrays, which
are widely accepted as the state-of-the-art in microarray
technology. Affymetrix provides us with GeneChip probe arrays
under an agreement that expires on January 1, 2002, but
which we have the option to extend for up to two additional
successive two-year terms. This agreement provides us with
nonexclusive access to GeneChip probe arrays for our use in
generating gene expression databases for license to multiple
third parties and custom databases for license to a single third
party. If Affymetrix licenses GeneChip probe arrays to others for
 similar uses, our business may suffer. The agreement also
prohibits us from buying microarrays from third parties if
Affymetrix can demonstrate that those third party microarrays
materially infringe Affymetrixs intellectual property
rights. If Affymetrix is unable or unwilling to supply us with
GeneChip probe arrays or if such probe arrays are not available,
we will need to obtain access to alternative microarray
technologies or expand the use of our patented READS technology.
Alternative microarray technologies may not be available to us,
or may only be available to us on unfavorable terms. Restricted
or curtailed access to GeneChip probe arrays could cause our
business to suffer by delaying or increasing the cost of
expansion of the GeneExpress database suite.

We have a history of operating losses which are likely to
continue for some time.

We have incurred operating losses in each year since our
inception. At December 31, 1999, we had accumulated
operating losses of approximately $78.1 million. Our losses to
date have resulted principally from costs incurred in the
development of our gene expression databases, the
$35.2 million non-recurring charge incurred in connection
with our acquisition of Oncormed in 1998 and general and
administrative

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If our access to necessary tissue samples, information or
licensed technologies is restricted, we will not be able to
continue to develop our business.

To continue to build our GeneExpress database suite and custom
database products, we need access to normal and diseased human
and other tissue samples, other biological materials and related
clinical and other information. We compete with many other
companies for these materials and information. We may not be able
 to obtain or maintain access to these materials and information
on acceptable terms, if at all. In addition, government
regulation in the United States and foreign countries could
result in restricted access to, or use of, human and other tissue
 samples. If we lose access to sufficient numbers or sources of
tissue samples, or if tighter restrictions are imposed on our use
 of the information generated from tissue samples, our business
will suffer.

Some of our genomics and bioinformatics technologies have been
acquired or licensed from third parties, and we expect to acquire
 or license additional technologies from third parties. Our
product development activities could suffer if we are not able to
 establish access to new or additional technologies that we
believe are important to our business.

Any inadequacy in the protection of our intellectual property
could hurt our business.

Our success will depend in part on our ability to obtain
commercially valuable patent claims and to protect our
intellectual property. Our patent position is generally uncertain
 and involves complex legal and factual questions. Legal
standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of
future protection for our proprietary rights is uncertain. The
risks and uncertainties that we face with respect to our patents
and other proprietary rights include the following:



| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the pending patent applications we have filed or to which we have
	 exclusive rights may not result in issued patents or may take
	longer than we expect to result in issued patents;
|
| |  | the claims of any patents which are issued may not provide
	meaningful protection;                                                                                                   
|
| |  | we may not be able to develop additional proprietary technologies
	 that are patentable;                                                                                             
|
| |  | the patents licensed or issued to us or our customers may not
	provide a competitive advantage;                                                                                      
|
| |  | other companies may challenge patents licensed or issued to us or
	 our customers;                                                                                                   
|
| |  | patents issued to other companies may harm our ability to do
	business;                                                                                                              
|
| |  | other companies may independently develop similar or alternative
	technologies or duplicate our technologies; and                                                                    
|
| |  | other companies may design around technologies we have licensed
	or developed.                                                                                                       

We may apply for patent protection for methods relating to gene
expression and disease-specific patterns of gene expression that
we identify and individual disease genes and targets that we
discover. These patent applications may include claims relating
to novel genes and gene fragments and to novel uses

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We also rely on trade secret protection and confidentiality
agreements to protect our interests in proprietary know-how that
is not patentable and for processes for which patents are
difficult to enforce. We have taken security measures to protect
our proprietary know-how and confidential data and continue to
explore further methods of protection. While we require all
employees, consultants, and customers to enter into
confidentiality agreements, we cannot be certain that we will be
able to meaningfully protect our trade secrets. Any material leak
 of confidential data into the public domain or to third parties
could cause our business, financial condition and results of
operations to suffer.

We are currently involved in patent litigation with Incyte
Pharmaceuticals, Inc. and may in the future be subject to
additional litigation and infringement claims.

In December 1999, Incyte Pharmaceuticals, Inc. filed an
action against us in the United States District Court for the
Northern District of California, Case No. C99-5180 MJJ. In
the action, Incyte asserts claims against us for infringement of
certain patents held by Incyte. The alleged infringement involves
 our use of a process that Affymetrix, Inc. recommends be used in
 the preparation of samples for use with the Affymetrix GeneChip.
 We filed both a motion to transfer venue to the state of
Maryland and an answer to the complaint in which we deny such
infringement. We intend to defend our position vigorously. There
can be no guarantee that our defense will be successful and
neither the ultimate outcome nor the range of any losses
resulting from this action can be predicted at this time. We
expect this action will continue to require significant
management time and expense for the foreseeable future.

As illustrated by the Incyte litigation, the technologies that we
 use to develop our products, and those that we incorporate in
our products, may be subject to claims that they infringe the
patents or proprietary rights of others. In particular, we are
aware of a number of patents and patent applications owned by
others relating to the analysis of gene expression or the
manufacture and use of DNA chips. The risk of additional
litigation will increase as the genomics, biotechnology and
software industries expand, more patents are issued and other
companies engage in other genomic-related businesses. We
anticipate that we will probably receive in the future additional
 notices from third parties alleging patent infringement.

Litigation thus may be necessary to:



| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | assert claims of infringement;                                                        
|
| |  | enforce our patents;                                                                  
|
| |  | protect our trade secrets or know-how; or                                             
|
| |  | determine the enforceability, scope and validity of the
	proprietary rights of others.

We could incur substantial litigation costs to defend ourselves
in patent suits brought by other companies or to initiate such
suits. Substantial litigation costs and potential adverse
outcomes could cause our business, financial condition and
results of operations to suffer. In addition, litigation could
cause disruption in our business activities and divert
managements time and attention from the operation of our
business.

International patent protection is uncertain.

Patent law outside the United States is uncertain and is
currently undergoing review and revision in many countries.
Further, the laws of some foreign countries may not protect our
intellectual property rights to the same extent as U.S. laws. We
may participate in opposition proceedings to determine the
validity of our or our competitors foreign patents, which
could result in substantial costs and diversion of our efforts.
Finally, some of our patent protection in the United States is
not available to us in foreign countries due to the laws of those
 countries.

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Our business and the products developed using the information
in our databases may be subject to government regulation.

Any new drug developed by the efforts of our customers as a
result of their use of our GeneExpress database suite or our
other products must undergo an extensive regulatory review
process in the United States and other countries before it can be
 marketed. This regulatory process can take many years and
require substantial expense. Changes in FDA policies and the
policies of similar foreign regulatory bodies can increase the
delay for each new drug, product license and biological license
application. We expect similar delays in the regulatory review
process for any diagnostic or agricultural product, where similar
 review or other approval is required. Even if marketing
clearance is obtained, a marketed product and its manufacturer
are subject to continuing review. Discovery of previously unknown
 problems with a product may result in withdrawal of the product
from the market.

No product resulting from the use of our databases has been
released for commercialization in the United States or elsewhere.
 In addition, no investigational new drug application has been
submitted for any such product candidate. We expect to rely on
our customers to file such applications and generally direct the
regulatory review process. We cannot be certain if or when our
customers will submit any applications for regulatory review, or
whether our customers will be able to obtain marketing clearance
for any products on a timely basis, if at all. If our customers
fail to obtain required governmental clearances, it will prevent
them from marketing drugs or diagnostic products until such
clearance can be obtained, if at all. This will in turn reduce
the chance of our ever receiving royalty payments from our
customers. The occurrence of any of these events may cause our
business, financial condition and results of operations to
suffer.

In addition, our access to and use of human or other tissue
samples in the expansion of our GeneExpress database suite and
the creation of custom databases may become subject to government
 regulation, both in the United States and abroad. United States
and foreign government agencies may also impose restrictions on
the use of data derived from human or other tissue samples. If
our access to or use of human tissue samples, or our
customers use of data derived from such samples, is
restricted, our business will suffer.

Because our customers access our products primarily via the
Internet, our business is subject to government regulation
relating to the Internet. Because of the increasing use of the
Internet as a communication and commercial medium, the government
 has adopted and may adopt additional laws and regulations with
respect to the Internet covering such areas as pricing, content,
taxation, copyright protection, user privacy, distribution and
characteristics and quality of production and services.

We may have difficulty managing our growth.

We expect to continue to experience significant growth in the
number of our employees and customers and the scope of our
operations. In particular, we plan significant growth in our
GeneExpress database suite business. This growth may continue to
place a significant strain on our management and operations. Our
ability to manage this growth will depend upon our ability to
broaden our management team and our ability to attract, hire and
retain skilled employees. Our success will also depend on the
ability of our officers and key employees to continue to
implement and improve our operational and other systems, to
manage multiple, concurrent customer relationships and to hire,
train and manage our employees. Our future success is heavily
dependent upon growth and acceptance of our GeneExpress database
products. If we cannot scale our business appropriately or
otherwise adapt to anticipated growth in this area, a key part of
 our strategy may not be successful. In addition, we must
continue to invest in customer support resources as the number of
 database customers and their requests for support increase. Our
customers typically have worldwide operations and may require
support at multiple U.S. and foreign sites.

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The genomics industry is intensely competitive and evolving
rapidly, and we may fall behind our competitors.

There is intense competition among entities attempting to
identify genes associated with specific diseases and to develop
products and services based on these discoveries. We face
competition in these areas from pharmaceutical, biotechnology and
 diagnostic companies, academic and research institutions and
government or other publicly funded agencies, both in the United
States and abroad. In particular, Incyte Pharmaceuticals has
announced its intention to develop a gene expression reference
database that may compete with our GeneExpress database suite,
and there may be others developing competitive products. In
addition, other entities are attempting to identify and patent
randomly sequenced genes and gene fragments, while others are
pursuing a gene identification, characterization and product
development strategy based on positional cloning. We are aware
that certain entities are using a variety of gene expression
analysis methodologies, including the use of chip-based systems,
to attempt to identify disease-related genes. In addition,
numerous pharmaceutical companies are developing genomic research
 programs, either alone or in partnership with our competitors.
Competition among such entities is intense and is expected to
increase. In order to compete against existing and future
technologies, we will need to demonstrate to potential customers
that our technologies and capabilities are superior to competing
technologies.

Some of our competitors have substantially greater capital
resources, research and development staffs, facilities,
manufacturing and marketing experience, distribution channels and
 human resources than we do. These competitors may discover,
characterize or develop important genes, drug targets or drug
leads, drug discovery technologies or drugs in advance of us or
our customers or which are more effective than those developed by
 us or our customers, or may obtain regulatory approvals of their
 drugs more rapidly than we do or our customers do, any of which
could have a material adverse effect on any of our similar
programs. Moreover, our competitors may obtain patent protection
or other intellectual property rights that would limit our rights
 or our customers ability to use our products to
commercialize therapeutic, diagnostic or agricultural products.
We also face competition from these and other entities in gaining
 access to cells, tissues and nucleic acid samples used in our
discovery programs.

We will rely on our customers for support of certain of our
discovery programs and intend to rely on our customers for
preclinical and clinical development of related potential
products and the manufacturing and marketing of these products.
Each of our customers is conducting multiple product development
efforts within each disease area that is the subject of their
agreement with us. Generally, our agreements with our customers
do not preclude the customer from pursuing development efforts
utilizing approaches distinct from that which is the subject of
our agreement with them. Any of our product candidates,
therefore, may be subject to competition with another potential
product under development by a customer.

Future competition will come from existing competitors as well as
 other companies seeking to develop new technologies for drug
discovery based on gene sequencing, target gene identification,
bioinformatics and related technologies. In addition, certain
pharmaceutical and biotechnology companies have significant needs
 for genomic information and may choose to develop or acquire
competing technologies to meet such needs. Our agreement with
Affymetrix provides us with nonexclusive access to GeneChip probe
 arrays for our use in generating gene expression databases for
license to third parties. If Affymetrix licenses GeneChip probe
arrays to others for similar uses, our business may suffer.

Genomic technologies have undergone, and are expected to continue
 to undergo, rapid and significant change. Our future success
will depend in large part on maintaining a competitive position
in the genomics field. Rapid technological development by us or
others may result in products or technologies becoming obsolete
before we recover the expenses we incur in connection with our
development. Products offered by us could be made obsolete by
less expensive or more effective drug discovery technologies,
including technologies that may be unrelated to genomics. We may
not be able to make the enhancements to our technology necessary
to compete successfully with newly emerging technologies.

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Our revenues are derived primarily from, and are subject to,
risks faced by the pharmaceutical and biotechnology industries.

We expect that our revenues in the foreseeable future will be
derived primarily from products provided to the pharmaceutical
and biotechnology industries. Accordingly, our success will
depend directly upon their demand for our products. Our operating
 results may fluctuate substantially due to reductions and/ or
delays in research and development expenditures by companies in
these industries. These reductions and/ or delays may result from
 factors such as:



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | changes in economic conditions;                                                        
|
| |  | changes in the regulatory environment affecting health care and
	health care providers;
|
| |  | pricing pressures and reimbursement policies;                                          
|
| |  | market-driven pressures on companies to consolidate and reduce
	costs; and             
|
| |  | other factors affecting research and development spending.                             

None of these factors is within our control.

Our business is dependent on the continuous, reliable and
secure operation of our Internet applications and related tools
and functions we provide.

Because our customers access our products primarily via the
Internet, we depend upon the continuous, reliable and secure
operation of Internet servers and related hardware and software.
To the extent that our customers access to our products via
 the Internet is interrupted, our business could suffer. Our
computer and communications hardware is protected through
physical and software safeguards. However, they are still
vulnerable to fire, storm, flood, power loss, earthquakes,
telecommunications failures, physical or software break-ins and
similar events. In addition, our database products are complex
and sophisticated and could contain erroneous data, design
defects or software errors that could be difficult to detect and
correct. Software bugs and viruses may be found in current
products or any future products that we develop. If we fail to
maintain and further develop the necessary data to support our
customers drug discovery efforts, it could result in loss
of or delay in our revenues and market acceptance. We also depend
 upon third parties to provide our customers with web browsers
and Internet and on-line services necessary for access to our
website. Any sustained disruption in Internet access provided by
third parties could adversely impact our business.

Multiple factors beyond our control may cause fluctuations in
our operating results and may cause our business to suffer.

Our revenues and results of operations may fluctuate
significantly, depending on a variety of factors, including the
following:



| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | our success in selling, and changes in the demand for, our
	products;                                               
|
| |  | variations in the timing of payments from customers and the
	recognition of these payments as revenues;             
|
| |  | the pricing of our products;                                                                                        
|
| |  | the timing of our new product introductions, if any;                                                                
|
| |  | changes in the research and development budgets of our customers
	and potential customers;                          
|
| |  | the introduction of new products and services by our competitors;                                                   
|
| |  | regulatory actions;                                                                                                 
|
| |  | expenses related to, and the results of, litigation and other
	proceedings relating to intellectual property rights;

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| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the cost and timing of our adoption of new technologies; and                                                                                                                            
|
| |  | the cost, quality and availability of cell and tissue samples,
	reagents and related components and technologies, including those
	 supplied to us pursuant to contractual arrangements.

In particular, revenues from our database business are
unpredictable because:



| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | the sales cycle for our database products is lengthy;                                            
|
| |  | we are dependent upon continued commercial demand for the
	information we gather and provide; and
|
| |  | the time required to develop custom databases can vary
	significantly.                           

We will not be able to control many of these factors. In
addition, if our revenues in a particular period do not meet
expectations, we may not be able to adjust our expenditures in
that period, which could cause our business to suffer. We believe
 that period-to-period comparisons of our financial results will
not necessarily be meaningful. You should not rely on these
comparisons as an indication of our future performance. If our
operating results in any future period fall below the
expectations of securities analysts and investors, our stock
price may fall, possibly by a significant amount.

Any future acquisitions will create risks and uncertainties.

As part of our business strategy, we may acquire other assets,
technologies and businesses. We cannot be sure, however, that
acquisition candidates will be available or will be available on
terms acceptable to us. Future acquisitions that we may complete
involve risks such as the following:



| |   |                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may be exposed to unknown liabilities of acquired companies;                                                                                                                                                                                                             
|
| |  | our acquisition and integration costs may be higher than we
	anticipated and may cause our quarterly and annual operating
	results to fluctuate;                                                                                                                            
|
| |  | combining the operations and personnel of the acquired businesses
	 with our own may be difficult and costly, and integrating or
	completing the development and application of acquired
	technologies may disrupt our business and divert
	managements time and attention;
|
| |  | our relationships with key customers of acquired businesses may
	be impaired due to changes in management and ownership of the
	acquired businesses;                                                                                                                        
|
| |  | we may be unable to retain key employees of the acquired
	businesses or hire enough qualified technical personnel to staff
	new or expanded operations;                                                                                                                     
|
| |  | we may incur amortization expenses if an acquisition results in
	significant goodwill or other intangible assets; and                                                                                                                                                       
|
| |  | our stockholders may be diluted if we pay for the acquisition
	with equity securities.                                                                                                                                                                                      

We depend on key employees in a competitive market for skilled
 personnel.

We are highly dependent on the principal members of our
management, operations and scientific staff and have entered into
 employment agreements with many of these persons. The loss of
any these persons services could have a material adverse
effect on our business.

Our future success also will depend in part on the continued
service of our key scientific, software, bioinformatics and
management personnel and our ability to identify, hire and retain
 additional personnel. We experience intense competition for
qualified personnel. We may not be able to continue to attract
and retain personnel necessary for the development of our
business.

28



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Our activities involve hazardous materials and may subject us
to environmental liability.

Our research and development involves the controlled use of
hazardous and radioactive materials and biological waste. We are
subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of
 these materials and certain waste products. Although we believe
that our safety procedures for handling and disposing of these
materials comply with legally prescribed standards, we cannot
completely eliminate the risk of accidental contamination or
injury from these materials. In the event of an accident, we
could be held liable for damages or penalized with fines, and
this liability could exceed our resources.

We believe that we are in compliance in all material respects
with applicable environmental laws and regulations and currently
do not expect to make material additional capital expenditures
for environmental control facilities in the near term. However,
we may have to incur significant costs to comply with current or
future environmental laws and regulations.

We are exposed to product liability and related risks.

We may be exposed to claims of liability from the use of products
 that either we or our customers provide. For example, we may be
subject to product liability if our GeneExpress or custom
database products contain inaccurate information or if any of our
 customers develops or commercializes a product discovered
through the use of our technology which results in injury or
death to clinical trial participants or patients. In addition,
genetic testing and information services that were provided by
Oncormed prior to our acquisition of Oncormed could expose us to
the risk of certain types of litigation, including medical
malpractice claims, negligence claims or contract disputes. In
particular, we are involved in a litigation matter relating to
Oncormed described in the section of this Report on
Form 10-K regarding legal proceedings. We currently maintain
 product liability and medical malpractice insurance. Our
insurance coverage may not be adequate to protect us against
future claims. Furthermore, our customers may not indemnify us
against these types of claims or may not themselves be adequately
 insured or, in the case of smaller companies, have a net worth
sufficient to satisfy any product liability claims. A product
liability claim, product recall or a medical malpractice claim
could cause our business, financial condition and results of
operations to suffer.

We may need to raise additional funds in the future.

We believe that existing cash and marketable securities,
borrowings under equipment financing arrangements and anticipated
 cash flow from operations will be sufficient to support our
operations for the foreseeable future. We may choose to raise
additional capital due to market conditions or strategic
considerations even if we have sufficient funds for our operating
 plan. We could require additional funding in the future. In
particular, we may need additional funds to expand the content of
 our databases and to increase our marketing efforts. We may seek
 funding through public or private equity offerings, debt
financings or arrangements with customers. If we raise additional
 capital by issuing equity or convertible debt securities, the
issuances may dilute share ownership and future investors may be
granted rights superior to those of current shareholders.
Additional financing may not be available when needed, or, if
available, may not be available on favorable terms. If we cannot
obtain adequate financing on acceptable terms when such financing
 is required, our business will be adversely affected.

Our stock price is highly volatile.

The market price of our common stock is likely to continue to be
highly volatile due to risks and uncertainties described in this
Report on Form 10-K, as well as other factors, including:



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | conditions and publicity regarding the genomics or life sciences
	industries generally;
|
| |  | sales of substantial amounts of our stock by existing
	stockholders;                   

29



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| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | price and volume fluctuations in the stock market at large which
	do not relate to our operating performance; and
|
| |  | comments by securities analysts, or our failure to meet
	analysts expectations.                                 

Furthermore, the stock market has from time to time experienced
extreme price and volume fluctuations that may be unrelated to
the operating performance of particular companies. In addition,
in the past, class action lawsuits have been initiated against
biotechnology and pharmaceutical companies following periods of
volatility in the market prices of these companies stock.
In general, decreases in our stock price would reduce the value
of our stockholders investments and could limit our ability
 to raise necessary capital or make acquisitions of assets or
businesses. If litigation were instituted on this basis, it could
 result in substantial costs and would divert managements
attention and resources. This could have a material adverse
effect on our business, financial condition and results of
operations.

We have implemented anti-takeover provisions that may reduce
the market price of our common stock.

Provisions of our Certificate of Incorporation and By-laws and
Delaware law could make it more difficult for a third party to
acquire us, even if the acquisition would be beneficial to our
stockholders. This could prevent the consummation of a
transaction in which our stockholders could receive a substantial
 premium over the current market price for their shares.

Our Certificate of Incorporation gives our board of directors the
 authority to issue up to 10,000,000 shares of preferred stock
and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares
without any further vote or action by our stockholders. The
rights of the holders of common stock will be subject to, and may
 be harmed by, the rights of the holders of any shares of
preferred stock that may be issued in the future. The issuance of
 preferred stock may delay, defer or prevent a change in control,
 as the terms of the preferred stock that might be issued could
potentially prohibit our consummation of any merger,
reorganization, sale of substantially all of our assets,
liquidation or other extraordinary corporate transaction without
the approval of the holders of the outstanding shares of
preferred stock. In addition, the issuance of preferred stock
could have a dilutive effect on our stockholders.

We also have a classified board of directors serving staggered
three-year terms. This could delay or limit the removal of
incumbent directors or the assumption of control by stockholders,
 even if such removal or assumption of control would be
beneficial to stockholders, and also could discourage or make
more difficult a merger, tender offer or proxy contest, even if
such events would be beneficial, in the short term, to the
interests of stockholders.






|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

Our headquarters consist of approximately 50,000 square feet of
office and research laboratory space located in Gaithersburg,
Maryland under a lease which expires in 2007. We also lease
approximately 26,000 square feet of additional office and
research laboratory space in Gaithersburg, Maryland and 8,000
square feet of office space in Berkeley, California under lease
agreements with terms expiring in 2001 and 2004, respectively. We
 are currently evaluating several alternatives for additional
space to meet our current and projected needs.






|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

On October 19, 1999, a lawsuit was filed in the Circuit
Court of Cook County, Illinois against Oncormed, Inc. and Gene
Logic Inc. alleging that Oncormed was negligent in determining
and reporting laboratory test results of a genetic test conducted
 by Oncormed. Oncormed sold its testing business to a third-party
 company prior to our acquisition of Oncormed. We are not engaged
 in any type of genetic testing, nor do we have plans to enter
such markets. We maintain insurance coverage against such claims,
 and do not believe this action will have a material adverse
impact on our business, financial condition or results of
operations.

30



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##### Table of Contents



In December 1999, Incyte Pharmaceuticals, Inc. filed an
action against us in the United States District Court for the
Northern District of California, Case No. C99-5180 MJJ. In
the action, Incyte asserts claims against us for infringement of
certain patents held by Incyte. The alleged infringement involves
 our use of a process that Affymetrix, Inc. recommends be used in
 the preparation of samples for use with the Affymetrix GeneChip.
 We filed both a motion to transfer venue to the state of
Maryland and an answer to the complaint in which we deny such
infringement. We intend to defend our position vigorously. There
can be no guarantee that our defense will be successful and
neither the ultimate outcome nor the range of any losses
resulting from this action can be predicted at this time. We
expect this action will continue to require significant
management time and expense for the foreseeable future.






|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II






|        |                                                                           
|------- | --------------------------------------------------------------------------
|ITEM 5. | MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
	STOCKHOLDER MATTERS

Price Range of Common Stock

Our common stock has been traded on the Nasdaq National Market
under the symbol GLGC since November 21, 1997. The following
 table sets forth for the periods indicated the high and low
closing prices for our common stock, as reported by the Nasdaq
National Market.

|                             |  |      |        |     |  |   |       | 
|---------------------------- |  | ---- | ------ | --- |  | - | ----- | 
|                             |  | High |        | Low
|                             |  |      |        |    
|Year ended December 31, 1998 |  |      |        |     |  |   |       | 
|                            
|                            
|                            
|                            
|First Quarter                |  | $    | 9.250  |     |  | $ | 7.625 | 
|                            
|                            
|                            
|                            
|Second Quarter               |  |      | 8.500  |     |  |   | 6.000 | 
|                            
|                            
|                            
|                            
|Third Quarter                |  |      | 10.125 |     |  |   | 3.688 | 
|                            
|                            
|                            
|                            
|Fourth Quarter               |  |      | 6.969  |     |  |   | 3.000 | 
|                            
|                            
|                            
|                            
|Year ended December 31, 1999 |  |      |        |     |  |   |       | 
|                            
|                            
|                            
|                            
|First Quarter                |  |      | 8.000  |     |  |   | 4.375 | 
|                            
|                            
|                            
|                            
|Second Quarter               |  |      | 5.219  |     |  |   | 3.438 | 
|                            
|                            
|                            
|                            
|Third Quarter                |  |      | 6.906  |     |  |   | 3.688 | 
|                            
|                            
|                            
|                            
|Fourth Quarter               |  | $    | 28.125 |     |  | $ | 5.438 | 

On March 15, 2000, the last reported sale price of our
common stock on the Nasdaq National Market was $72.0625. As of
March 15, 2000 there were approximately 219 holders of
record of the Companys Common Stock.

We have never declared or paid any cash dividends on our capital
stock. We currently intend to retain earnings, if any, to support
 the development of our business and do not anticipate paying
cash dividends for the foreseeable future. Payment of future
dividends, if any, will be at the discretion of our board of
directors after taking into account various factors, including
our financial condition, operating results and current and
anticipated cash needs.

31



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##### Table of Contents








|        |                                     
|------- | ------------------------------------
|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below with
respect to the Companys consolidated statements of
operations for the years ended December 31, 1999, 1998 and
1997 and with respect to the consolidated balance sheets at
December 31, 1999 and 1998 have been derived from audited
consolidated financial statements included as part of this Report
 on Form 10-K. The statements of operations data for the
year ended December 31, 1996 and 1995 and the balance sheet
data at December 31, 1997, 1996 and 1995 are derived from
audited financial statements not included in this Report on
Form 10-K. The following selected financial data should be
read in conjunction with the consolidated financial statements
and notes thereto included elsewhere in this Report on
Form 10-K.

|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |     | 
|--------------------------------------------------------------------- | ----------------------------------------------- | ---------------------------------------- | ------- | ------ |  | ---- | ------- | ------ |  | ---- | ------ | ----- |  | - | ------ | ----- |  | - | ----- | --- | 
|                                                                      |                                                 |                                         
|                                                                      |                                                 | Years Ended December 31,                
|                                                                      |                                                 |                                         
|                                                                      |                                                 | 1999                                     |         | 1998   |  | 1997 |         | 1996   |  | 1995
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |     
|                                                                      |                                                 |                                         
|                                                                      |                                                 | (in thousands, except per share amounts)
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Consolidated Statement of Operations Data:                            |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Revenues                                                              |                                                 | $                                        | 19,202  |        |  | $    | 13,197  |        |  | $    | 2,047  |       |  | $ |       |       |  | $ |      |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Operating expenses:                                                   |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Research and development                        |                                          |         | 29,570 |  |      |         | 16,605 |  |      |        | 6,061 |  |   |        | 1,741 |  |   |       | 486 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | General and administrative                      |                                          |         | 9,194  |  |      |         | 7,552  |  |      |        | 3,825 |  |   |        | 1,345 |  |   |       | 258 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Acquired in-process research and development(1) |                                          |         |       |  |      |         | 35,196 |  |      |        |      |  |   |        |      |  |   |       |    | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Amortization of goodwill                        |                                          |         | 1,524  |  |      |         | 381    |  |      |        |      |  |   |        |      |  |   |       |    | 
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|Total operating expenses                                              |                                                 |                                          | 40,288  |        |  |      | 59,734  |        |  |      | 9,886  |       |  |   | 3,086  |       |  |   | 744   |    
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|Loss from operations                                                  |                                                 |                                          | (21,086 | )      |  |      | (46,537 | )      |  |      | (7,839 | )     |  |   | (3,086 | )     |  |   | (744  | )  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest income, net                                                  |                                                 |                                          | 685     |        |  |      | 1,844   |        |  |      | 745    |       |  |   | 221    |       |  |   |      |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other income (expense)                                                |                                                 |                                          | 30      |        |  |      | (80     | )      |  |      |       |       |  |   |       |       |  |   |      |    
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Income tax expense                                                    |                                                 |                                          | 220     |        |  |      | 100     |        |  |      | 100    |       |  |   |       |       |  |   |      |    
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|Net loss                                                              |                                                 |                                          | (20,591 | )      |  |      | (44,873 | )      |  |      | (7,194 | )     |  |   | (2,865 | )     |  |   | (744  | )  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Accretion of mandatory redemption value of preferred stock            |                                                 |                                          |        |        |  |      |        |        |  |      | 1,286  |       |  |   | 494    |       |  |   | 1     |    
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|Net loss attributable to common stockholders                          |                                                 | $                                        | (20,591 | )      |  | $    | (44,873 | )      |  | $    | (8,480 | )     |  | $ | (3,359 | )     |  | $ | (745  | )  
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|Basic and diluted net loss per common share                           |                                                 | $                                        | (1.04   | )      |  | $    | (2.86   | )      |  | $    | (3.97  | )     |  | $ | (5.87  | )     |  | $ | (3.48 | )  
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    
|Shares used in computing basic and diluted net loss per common
	share |                                                 |                                          | 19,833  |        |  |      | 15,681  |        |  |      | 2,138  |       |  |   | 572    |       |  |   | 214   |    
|                                                                      |                                                 |                                          |         |        |  |      |         |        |  |      |        |       |  |   |        |       |  |   |       |    

|                                                         |  |                |        |      |  |      |        |      |  |      |        |  |  |   |        |   |  |   |       |  
|-------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | - |  | - | ----- | -
|                                                         |  |               
|                                                         |  | December 31,  
|                                                         |  |               
|                                                         |  | 1999           |        | 1998 |  | 1997 |        | 1996 |  | 1995
|                                                         |  |                |        |      |  |      |        |      |  |     
|                                                         |  |               
|                                                         |  | (in thousands)
|                                                        
|                                                        
|                                                        
|                                                        
|Consolidated Balance Sheet Data:                         |  |                |        |      |  |      |        |      |  |      |        |  |  |   |        |   |  |   |       |  
|                                                        
|                                                        
|                                                        
|                                                        
|Cash, cash equivalents and marketable securities         |  | $              | 12,446 |      |  | $    | 30,982 |      |  | $    | 46,621 |  |  | $ | 5,671  |   |  | $ | 348   |  
|                                                        
|                                                        
|                                                        
|                                                        
|Working capital                                          |  |                | 5,423  |      |  |      | 26,573 |      |  |      | 42,455 |  |  |   | 4,581  |   |  |   | 246   |  
|                                                        
|                                                        
|                                                        
|                                                        
|Total assets                                             |  |                | 41,166 |      |  |      | 55,566 |      |  |      | 53,972 |  |  |   | 7,819  |   |  |   | 424   |  
|                                                        
|                                                        
|                                                        
|                                                        
|Total long-term debt and capital lease obligations       |  |                | 4,590  |      |  |      | 5,305  |      |  |      | 1,551  |  |  |   | 446    |   |  |   |      |  
|                                                        
|                                                        
|                                                        
|                                                        
|Total mandatorily redeemable convertible preferred stock |  |                |       |      |  |      |       |      |  |      |       |  |  |   | 10,471 |   |  |   | 1,153 |  
|                                                        
|                                                        
|                                                        
|                                                        
|Total stockholders equity (deficit)                     |  |                | 23,068 |      |  |      | 41,288 |      |  |      | 46,067 |  |  |   | (4,187 | ) |  |   | (833  | )




|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In connection with our acquisition of Oncormed, we incurred a
	non-recurring charge of $35.2 million related to the
	write-off of acquired in-process research and development.

32



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|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF
	OPERATIONS AND FINANCIAL CONDITION

This Report on Form 10-K contains forward-looking
statements that involve risks and uncertainties. We generally use
 words such as anticipate, estimate,
plans, projects, continuing,
ongoing, expects, management
believes, we believe, we intend and
 similar expressions to indicate when we are making
forward-looking statements. You should not place undue reliance
on these forward-looking statements. The forward-looking
statements speak only as of the date on which they are made, and
we undertake no obligation to update any forward-looking
statement. Forward-looking statements include statements about
the performance and utility of our products, the timing and
availability of products under development, the ability of our
customers to develop products identified using our products, the
adequacy of capital resources and other expectations, plans,
objectives, assumptions or future events. These statements
involve estimates, assumptions and uncertainties that could cause
 actual results to differ materially from those expressed for the
 reasons described in this Report on Form 10-K. These risks
and uncertainties include, but are not limited to, the extent of
utilization of genomic information by the pharmaceutical and
biotechnology industries in both research and development, our
ability to retain existing and obtain additional database
customers, risks relating to the development of genomic database
products and their use by existing and potential customers, the
impact of technological advances and competition, our ability to
enforce our intellectual property rights, and the impact of the
intellectual property rights of others, as well as other risks
and uncertainties set forth below and in the section entitled
Risk Factors.

Overview

We were incorporated in September 1994 and have devoted
substantially all of our resources to the development of our
genomics technologies, bioinformatics systems and database
products for use in pharmaceutical, diagnostic and agricultural
product research and development. Our current customers include
American Home Products Corp.s Wyeth-Ayerst Research unit,
Aventis, Aventis CropScience, Fujisawa Pharmaceutical Co., Ltd.,
Japan Tobacco Inc., Merck & Co., Inc., N.V. Organon, a
unit of Akzo Nobel NV, PE Biosystems, Pfizer Inc.,
Procter & Gamble Pharmaceuticals, Inc., Schering-Plough
Corporations Schering-Plough Research Institute, SmithKline
 Beecham PLC, Therapeutic Genomics, Inc. and UCB Research Inc., a
 division of UCB Pharma.

Since 1997, we have developed custom gene expression databases
designed for each of our customers internal programs and
needs and targeted to specific therapeutic areas of interest,
including heart failure, kidney disease, osteoporosis,
psychiatric disorders and other major illnesses. Building on this
 know-how, in March 1999 we began developing our GeneExpress
 database suite of reference gene expression information. The
GeneExpress databases contain information from a broad range of
normal and diseased human tissues, tissues from experimental
animals, human and animal cell lines and tissues that have been
treated with many different drugs. We completed development of
the first commercial version of the GeneExpress database suite in
 November 1999. We currently market GeneExpress through
nonexclusive subscriptions to customers in the pharmaceutical,
biotechnology and diagnostic industries, and are developing
versions of the database suite to market to the academic and
government life science research community and to physicians and
patients. We sold our first GeneExpress subscription in
December 1999.

Customers for our custom database and related software products
provide us with various combinations of recurring technology and
database access fees, research fees, certain additional payments
upon the attainment of research and product development
milestones, royalty payments based on sales of any products
resulting from their use of our products, and nonrefundable
upfront payments all of which are recognized as revenue in
accordance with relevant generally accepted accounting
principles. Subscribers to our GeneExpress database suite will
pay us varying database access fees depending upon the level and
type of information they obtain.

Technology and database access fees are recognized evenly over
the term of each customer agreement. We recognize revenues from
research and development support when they are earned and is

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Our future profitability will depend in part on the successful
establishment of agreements with additional customers which
include various combinations of genomic databases, bioinformatics
 software and genomics technology and the successful
commercialization of our GeneExpress database suite. Payments for
 access to custom databases and the GeneExpress database suite
are expected to be our primary source of revenue for the
foreseeable future. We have not received, and do not expect to
receive, significant royalty or other revenues from development
and commercialization of products by our customers using our
databases and other technology for several years, if at all.
Revenues from our customers may be subject to significant
fluctuation in both timing and amount, and, therefore, our
results of operations for any period may not be comparable to the
 results of operations for any other period.

We have incurred operating losses in each year since our
inception. At December 31, 1999, we had accumulated
operating losses of approximately $78.1 million. Our losses have
resulted principally from costs incurred in the development of
our gene expression databases, the $35.2 million
non-recurring charge incurred in connection with our acquisition
of Oncormed and general and administrative costs associated with
our operations. These costs have exceeded our revenues which, to
date, have been generated principally from agreements for our
custom database and related software products. We expect to incur
 additional operating losses in future years.

Update on In-process Research and Development

In connection with the acquisition of Oncormed in
September 1998, we allocated $35.2 million of the
$39.2 million purchase price to in-process research and
development projects. This allocation represents the estimated
fair value based on discounted cash flows related to the
incomplete research and development projects. At the time of
acquisition, the progress of these projects had not yet reached
technological feasibility and the projects had no alternative
future uses. Accordingly, these costs were expensed as of the
acquisition date.

At December 31, 1999, we had substantially completed the
technology projects that were underway as of the acquisition. In
general, we believe these research and development projects are
on track with managements plans at the time the acquisition
 occurred. Through December 31, 1999, no significant
adjustments have been made in the overall economic assumptions or
 expectations that underlie our acquisition decision and related
purchase accounting. All in-process research and development
projects acquired as a result of the Oncormed acquisition have
been incorporated in our existing products or technologies.

Although we have substantially completed the projects, we cannot
assure you that products or technologies resulting from those
projects will achieve commercial success. If these products or
technologies are not successfully developed or commercially
successful, future results of operations of ours may be adversely
 affected.

Results of Operations

Years ended December 31, 1999 and 1998

Revenues increased to $19.2 million in 1999, from
$13.2 million in 1998. The increase in revenues primarily
resulted from the expansion of our relationships with Japan
Tobacco and Procter & Gamble in late 1998 and the addition of
 new custom database customers. Payments from each of Aventis
CropScience, Japan Tobacco and Procter & Gamble accounted for
 10% or more of revenues for

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Research and development expenses increased $13.0 million to
 $29.6 million in 1999 from $16.6 million in 1998 and
was primarily attributable to approximate increases of
$5.4 million in research agreement expenses, $2.7 million in
 laboratory supplies, and $2.4 million in personnel
expenses. This increase primarily relates to our efforts in
building our GeneExpress database suite which started in
March 1999, expansion of our custom database and
bioinformatics software businesses to accommodate new and
expanded relationships with customers, and further development of
 our Flow-thru Chip program. We expect research and development
expenses to increase as we expand our GeneExpress database suite
and maintain new and expanding custom database development
programs with customers.

General and administrative expenses increased to
$9.2 million in 1999 from $7.6 million in 1998. These
costs include the costs of corporate operations, finance and
accounting, human resources and other general operations. For
1999 as compared to 1998, the increase of $1.6 million was
primarily attributable to an approximate increase of
$1.1 million in personnel expenses. This increase largely
relates to the expansion of our business development efforts,
marketing costs of new products, and other general costs
necessary to support the expansion of our operations. We expect
that general and administrative expenses will increase as we
expand our product offerings and our sales and marketing efforts.

Amortization of goodwill increased to $1.5 million in 1999
from $0.4 million in 1998, as a result of the acquisition of
Oncormed in September 1998.

Acquired in-process research and development was
$35.2 million in 1998, as a result of the non-recurring
charge for the acquisition of Oncormed in September 1998.

Net interest income decreased to $0.7 million in 1999 from
$1.8 million in 1998 primarily due to smaller cash and
investment balances as a result of funding our operating losses
in 1999 and additional interest expense paid on equipment loans.

Years ended December 31, 1998 and December 31,
1997

Revenues increased to $13.2 million in 1998 from
$2.0 million in 1997. The increase in revenues resulted
primarily from a full-year of custom database development
activities under existing customer relationships in addition to
new and expanded relationships in 1998. Payments from each of
Aventis CropScience, Japan Tobacco, Organon and Procter &
Gamble accounted for 10% or more of revenues for 1998, and
payments from each of Procter & Gamble and Japan Tobacco
accounted for 10% or more of revenues for 1997.

Research and development expenses increased to $16.6 million
 in 1998 from $6.1 million in 1997. Excluding the increase
in research and development costs of approximately
$0.8 million as a result of our acquisition of Oncormed, the
 remaining increase in research and development expenses was
primarily attributable to approximate increases of
$4.6 million in personnel expenses, $1.0 million in
research agreement expenses and $1.0 million in facility
costs. We also had general increases in laboratory supplies and
depreciation expense. During 1998, we further expanded our custom
 database and bioinformatics software businesses and our
Flow-thru Chip development program.

General and administrative expenses increased to
$7.6 million in 1998 from $3.8 million in 1997.
Excluding the increase in general and administrative expenses of
approximately $0.5 million as a result of our acquisition of
 Oncormed, the remaining increase in general and administrative
expenses was primarily attributable to approximate increases of
$1.2 million in personnel expenses, $0.5 million in
amortization of deferred compensation on stock options and
$0.5 million in facility costs. We also had general
increases in costs due to becoming a public company and
depreciation expense. In 1998, we continued to expand our
operations and business development efforts.

Amortization of goodwill was $0.4 million in 1998 as a
result of the acquisition of Oncormed.

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Acquired in-process research and development was
$35.2 million in 1998, as a result of the non-recurring
charge for the acquisition of Oncormed in September 1998.

Net interest income increased to $1.8 million in 1998 from
$0.7 million in 1997 due to a full-year of investment income
 in 1998 relating to the investment of proceeds from our 1997
private placement of equity securities and initial public
offering.

Years ended December 31, 1997 and December 31,
1996

Revenue under agreements with customers was approximately
$2.0 million in 1997. We received no revenues in 1996.
Substantially all of our 1997 revenues were from Procter &
Gamble and Japan Tobacco. Revenues from other sources were not
material.

Research and development expenses increased to $6.1 million
in 1997 from $1.7 million in 1996. The increase in research
and development expenses was primarily attributable to
approximate increases of $1.9 million in personnel expenses,
 $0.9 million in laboratory supplies and $0.5 million
in depreciation expense as a result of our expanding our custom
database and bioinformatics software businesses and our Flow-thru
 Chip development program.

General and administrative expenses increased to
$3.8 million in 1997 from $1.3 million in 1996. The
increase in general and administrative expenses was primarily
attributable to approximate increases of $0.7 million in
personnel expenses, $0.4 million in legal costs and
$0.2 million in facility costs in connection with the
overall scale-up of our operations and business development
efforts and $0.3 million in amortization of deferred
compensation on stock options.

Net interest income increased to $0.7 million in 1997 from
$0.2 million in 1996. The increase was primarily due to the
larger cash and investment balance on hand during 1997 as a
result of private placements of equity securities and the
completion of our initial public offering.

Liquidity and Capital Resources

From inception through December 31, 1999, we financed our
operations through the sale of equity securities, payments under
agreements with customers, and equipment and tenant improvement
financing. As of December 31, 1999, we had obtained
$0.8 million of capital lease financing and $6.3 million
under equipment and tenant improvement loans. As of
December 31, 1999, we had approximately $12.4 million
in cash and marketable securities, compared to $31.0 million
 as of December 31, 1998.

Net cash used in operating activities was $14.3 million in
1999 compared to $10.2 million in 1998. We primarily used
cash during 1999 and 1998 to fund our operating losses in
addition to expenditures relating to inventory and intangibles
and other assets.

Inventory increased $1.6 million during 1999 as a result of
purchases of Affymetrix GeneChips® used in the production of
 gene expression information associated with our GeneExpress
database suite which we began developing in March 1999. We
maintain inventory levels based on anticipated usage which is
expected to increase in 2000.

During 1999 and 1998, we had expenditures relating to intangibles
 and other assets of approximately $1.8 million and
$1.0 million, respectively. These expenditures were
primarily for software development costs, patent costs and
license fees. Beginning in 1999, we capitalized certain software
development costs incurred in developing certain products upon
the demonstration of technological feasibility. We recorded
capitalized software costs of $1.2 million as of
December 31, 1999. Software development costs are amortized
to research and development expense over three years using the
straight-line method. We commenced amortization of such costs
upon the completion of the first commercial version of the
GeneExpress database suite in November 1999. In addition, our
patent costs are amortized to research and development expense
over the useful life of the underlying patent upon issuance.
License fees are amortized to research and development expense
over periods of one to seventeen years. These expenditures

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Under an agreement with Therapeutic Genomics, Inc., we received
convertible preferred stock in 1999. We account for this
long-term investment under the cost method of accounting, as we
hold less than 10% of TGIs voting stock outstanding under
such arrangement and do not exert significant influence over TGI.

Our investing activities, other than sales, maturities and
purchases of available-for-sale securities, consisted of capital
expenditures, which totaled $3.2 million and
$6.9 million in 1999 and 1998, respectively, cash outlays of
 $2.6 million as a result of the acquisition of Oncormed in
1998 and the issuance of promissory notes to three of our
officers totaling $0.8 million in 1999. The decrease in
capital expenditures from year to year was primarily due to the
funding of tenant improvements and furniture purchases in the
first quarter of 1998 relating to the completion of our new
facility. In February 2000, two notes aggregating
$0.6 million plus accrued interest to date were repaid.

Net cash used in financing activities was $0.2 million in
1999 compared to net cash provided by financing activities of
$4.1 million in 1998. During 1999, we obtained
$0.4 million to finance tenant improvements compared to $4.7
 million of equipment financing received during 1998. The cash
obtained in these periods was offset by increased repayments
under equipment loans and capital lease obligations during 1999.

In June 1998, we entered into a $5.0 million loan
agreement for the financing of laboratory, computer and office
equipment. At December 31, 1999, we had borrowed
approximately $4.8 million. In November 1999, we
entered into a capital lease to purchase laboratory equipment for
 $0.3 million. We may terminate the lease during the first
six months of its term.

In January 1999, we entered into a three-year agreement with
 Affymetrix, pursuant to which Affymetrix supplies its GeneChip
probe arrays to us for the development of gene expression
databases. Under the terms of the agreement, we will pay
Affymetrix subscription fees for access to the probe arrays,
purchase the probe arrays and related instrumentation and
software, and pay royalties to Affymetrix on revenues generated
from certain database subscriptions fees. Our commitments under
other research and license agreements do not represent a
significant expenditure in relation to our total research and
development expense.

In September 1999 and January 2000, we signed
amendments to a Collaboration and License Agreement we entered
into in 1997 with Organon, one of our significant custom database
 customers. The amendments enable both parties to limit the scope
 and accelerate the date of termination of the original
agreement. At the time of the amendment, we discontinued
recognizing revenue related to the agreement, pending a
determination by Organon whether to terminate the agreement. As
amended, Organon can terminate our agreement effective as of
September 15, 2000. In consideration for our agreement to
allow early termination by Organon, which would result in the
elimination of its obligation to provide future financial and
other support for the collaboration, Organon agreed to grant us
an exclusive perpetual license upon any such early termination
for data developed pursuant to such agreement by Organon and us.
We believe this data has significant value and would
significantly enhance our GeneExpress database suite. If Organon
terminates the agreement early, Organon must pay
$2.0 million owed to us, $1.7 million of which has been
 previously recognized as revenue, and we must simultaneously
purchase, for $2.0 million, the exclusive license. At this
time, we believe it is unlikely that the agreement will be
terminated as permitted by the amendment but cannot be certain of
 the ultimate outcome. If the agreement is not terminated, the
parties will remain obligated to perform in accordance with the
terms of the agreement, as amended.

To date, all revenue received by us has been generated
principally from our custom database customers and related
software products. We expect that substantially all increases in
revenue for the foreseeable future will come from subscribers to
our GeneExpress database suite. Furthermore, our ability to
achieve profitability will be dependent upon our ability to enter
 into additional arrangements with customers and successfully
commercialize our GeneExpress database suite.

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On February 1, 2000, we completed a public offering of our
common stock at $56.00 per share. We sold 4,680,000 shares, and
received net proceeds of approximately $247.5 million.

We believe that existing cash and marketable securities,
borrowings under equipment financing arrangements and anticipated
 cash flow from operations will be sufficient to support our
operations for the foreseeable future. These estimates are
forward-looking statements that involves risks and uncertainties.
 Our actual future capital requirements and the adequacy of our
available funds will depend on many factors, including those
discussed under Risk Factors and the following:



| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | progress of our discovery programs;                                                                                                                                            
|
| |  | the number and breadth of these programs;                                                                                                                                      
|
| |  | our ability to establish and maintain additional arrangements
	with customers, including additional subscriptions to the
	GeneExpress database suite;                          
|
| |  | the commercial success of the in-process technologies we acquired
	 in our acquisition of Oncormed;                                                                            
|
| |  | the progress of the development and commercialization efforts of
	our customers;                                                                                               
|
| |  | the level of our activities relating to our independent discovery
	 programs and to the development and commercialization rights we
	retain in our arrangements with customers;
|
| |  | competing technological and market developments;                                                                                                                               
|
| |  | the costs associated with obtaining access to tissue samples and
	related information; and                                                                                     
|
| |  | the costs involved in preparing, filing, prosecuting, maintaining
	 and enforcing patent claims and other intellectual property
	rights.                                       

We could require additional financing in the future, which we may
 seek to raise through public or private equity offerings, debt
financing or arrangements with additional customers. Additional
financing or arrangements with additional customers may not be
available when needed, or if available, we might not be able to
obtain them on terms favorable to us and our stockholders. To the
 extent that we raise additional capital by issuing equity or
convertible debt securities, ownership dilution to stockholders
will result. If adequate financing is not available when needed,
we may be required to:



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | curtail significantly one or more of our research and development
	 programs;                                                                                     
|
| |  | obtain funds through arrangements with customers that may require
	 us to relinquish rights to certain of our technologies,
	discoveries or potential products; or
|
| |  | grant licenses on terms that are not favorable to us.                                                                                                             

New Pronouncement

In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements(SAB 101).
SAB 101 is based upon existing accounting rules and provides
 specific guidance on how those accounting rules should be
applied and specifically addresses revenue recognition for
nonrefundable technology access fees in the biotechnology
industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We are currently evaluating SAB 101
and what effect it may have on our financial statements.
Accordingly, we have not determined whether SAB 101 will
have a material impact on our financial position or results of
operations.






|         |                                                          
|-------- | ---------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company does not hold any financial instruments subject to
significant market risk.

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|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Companys Consolidated Financial Statements and notes
thereto, together with the Report of Independent Public
Accountants thereon, appear at pages F-1 through F-22 of
this Report on Form 10-K and are incorporated herein by
reference.






|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
	AND FINANCIAL DISCLOSURE

Not applicable.

PART III






|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Identification of Directors

The information required by this item is incorporated by
reference to the information set forth in the section captioned
Election of Directors, contained in the
Companys definitive Proxy Statement for the 2000 Annual
Meeting of Stockholders to be filed with the Securities and
Exchange Commission within 120 days after the end of the
Companys fiscal year ended December 31, 1999 (the
Proxy Statement).

Identification of Executive Officers

The information required by this item is incorporated by
reference to the information set forth in the section entitled
Management in Part I, Item 1 of this Report on
Form 10-K.

Compliance with Section 16(a) of the Securities Exchange
Act of 1934

The information required by this item is incorporated by
reference to the information set forth in the section entitled
Compliance with the Reporting Requirements of
Section 16(a) of the Securities Exchange Act of 1934
contained in the Proxy Statement.




ITEM 11.  EXECUTIVE COMPENSATION

The information required by this item is incorporated by
reference to the information set forth in the section captioned
Executive Compensation contained in the Proxy
Statement.






|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by
reference to the information set forth in the section captioned
Security Ownership of Certain Beneficial Owners and
Management contained in the Proxy Statement.






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by
reference to the information set forth in the section captioned
Certain Transactions contained in the Proxy
Statement.

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PART IV






|         |                                                                      
|-------- | ---------------------------------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON
	FORM 8-K

(a)1.  Financial Statements

|                                                                                                      |  |      |     | 
|----------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                      |  | Page
|                                                                                                      |  |     
|Financial Statements of Gene Logic Inc.                                                               |  |      |     | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Report of Independent Public Accountants                                                              |  |      | F-2 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Consolidated Balance Sheets as of December 31, 1999 and 1998                                          |  |      | F-3 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Consolidated Statements of Operations for the Years Ended
	December 31, 1999, 1998 and 1997           |  |      | F-4 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Consolidated Statements of Stockholders Equity for the
	Years Ended December 31, 1999, 1998 and 1997 |  |      | F-5 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Consolidated Statements of Cash Flows for the Years Ended
	December 31, 1999, 1998 and 1997           |  |      | F-6 | 
|                                                                                                     
|                                                                                                     
|                                                                                                     
|                                                                                                     
|Notes to Consolidated Financial Statements                                                            |  |      | F-7 | 

(a)2.  Financial Statement Schedules

Schedule II  Valuation and Qualifying Accounts

(a)3.  Index to Exhibits

|        |        |                         |  |                                                                                                                        
|------- | ------ | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|        | 3.1    |                         |  | Amended and Restated Certificate of Incorporation.(1)                                                                  
|        | 3.2    |                         |  | By-Laws, as amended and restated.(1)                                                                                   
|        | 4.1    |                         |  | Reference is made to Exhibits 3.1 and 3.2.                                                                             
|        | 4.2    |                         |  | Specimen stock certificate.(1)                                                                                         
|        | *10.1  |                         |  | Form of Indemnity Agreement entered into between Registrant and
	its directors and officers.(1)                        
|        | *10.2  |                         |  | Registrants 1997 Equity Incentive Plan(the Stock
	Plan).(1)                                                         
|        | *10.3  |                         |  | Form of Stock Option Agreement under the Stock Plan.(1)                                                                
|        | *10.4  |                         |  | Form of Stock Option Grant Notice.(1)                                                                                  
|        | *10.5  |                         |  | Registrants Employee Stock Purchase Plan and related
	offering document.(1)                                           
|        | *10.6  |                         |  | Registrants 1997 Non-Employee Directors Stock Option
	Plan, as corrected.(4)                                         
|        | *10.7  |                         |  | Form of Nonstatutory Stock Option under the Non-Employee
	Directors Stock Option Plan.(1)                             
|        | *10.8  |                         |  | Stock Restriction Agreement, dated July 31, 1996, between
	the Registrant and Mark D. Gessler.(1)                      
|        | *10.9  |                         |  | Stock Restriction Agreement, dated December 20, 1996,
	between the Registrant and Mark D. Gessler.(1)                  
|        | *10.10 |                         |  | Stock Restriction Agreement, dated February 29, 1996,
	between the Registrant and Michael J. Brennan.(1)               
|        | 10.11  |                         |  | Amended and Restated Investor Rights Agreement, dated July 
	15, 1997, between the Registrant and certain investors.(1)
|        | *10.12 |                         |  | Employment Agreement, dated October 31, 1995, between the
	Registrant and Michael J. Brennan.(1)                       
|        | *10.13 |                         |  | Amendment to the Employment Agreement, dated July 9, 1997,
	between the Registrant and Michael J. Brennan.(1)          
|        | *10.14 |                         |  | Employment Agreement, dated May 16, 1996, between the
	Registrant and Mark D. Gessler.(1)                              

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|        |        |                         |  |                                                                                                                                                                                                                                                                            
|------- | ------ | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|        | *10.15 |                         |  | Amendment to the Employment Agreement, dated July 9, 1997,
	between the Registrant and Mark D. Gessler.(1)                                                                                                                                                                 
|        | 10.16  |                         |  | Series A-1 Convertible Preferred Stock Purchase Warrant,
	dated August 1, 1995, issued to Oxford Bioscience Partners
	L.P.(1)                                                                                                                                              
|        | 10.17  |                         |  | Series A-1 Convertible Preferred Stock Purchase Warrant,
	dated August 1, 1995, issued to Oxford Bioscience
	Partners(Bermuda) Limited Partnership.(1)                                                                                                                     
|        | 10.18  |                         |  | Warrant for the purchase of shares of Common Stock dated
	August 29, 1997, between Registrant and ARE-708 Quince
	Orchard, LLC.(1)                                                                                                                                         
|        | 10.19  |                         |  | Warrant, dated April 24, 1997, issued to Venture Lending
	& Leasing, Inc.(1)                                                                                                                                                                                               
|        | 10.20  |                         |  | Warrant issued to Hambrecht & Quist LLC.(1)                                                                                                                                                                                                                                
|        | 10.21  |                         |  | Lease Agreement, dated May 7, 1997, between Registrant and
	M.O.R. XVIII Associates Limited Partnership.(1)                                                                                                                                                                
|        | 10.22  |                         |  | Lease Agreement, dated August 22, 1997, between Registrant
	and ARE-708 Quince Orchard, LLC, as amended.(1)                                                                                                                                                                
|        | 10.23  |                         |  | Warrant, dated April 15, 1997, between Registrant and
	Comdisco, Inc.(1)                                                                                                                                                                                                   
|        | 10.24  |                         |  | Target Discovery Collaboration and License Agreement, dated
	May 27, 1997, between Registrant and Procter & Gamble
	Pharmaceuticals, Inc. (Procter & Gamble).(1)(A)                                                                                                      
|        | 10.25  |                         |  | Promissory Note, dated May 27, 1997, between Registrant and
	Procter & Gamble.(1)(A)                                                                                                                                                                                       
|        | 10.26  |                         |  | Drug Target and Drug Lead Discovery Collaboration Agreement,
	dated September 9, 1997, between Registrant and Japan
	Tobacco Inc.(1)(A)                                                                                                                                    
|        | 10.27  |                         |  | Share Purchase Agreement, dated September 9, 1997, between
	Registrant and Japan Tobacco Inc.(1)                                                                                                                                                                           
|        | 10.28  |                         |  | License Agreement, dated May 22, 1996, between Registrant
	and Yale University.(1)(A)                                                                                                                                                                                      
|        | 10.29  |                         |  | Amendment, dated October 1, 1997, to the License Agreement
	between Registrant and Yale University.(1)(A)                                                                                                                                                                  
|        | 10.30  |                         |  | Sole Commercial Patent License Agreement, dated June 15,
	1997, between Registrant and Lockheed Martin Energy Research
	Company.(1)(A)                                                                                                                                     
|        | 10.31  |                         |  | License Agreement, dated May 30, 1997, between Registrant
	and Dr. Kenneth L. Beattie.(1)(A)                                                                                                                                                                               
|        | 10.32  |                         |  | Warrant, dated September 30, 1997, issued to Venture Lending
	 & Leasing, Inc.(1)                                                                                                                                                                                          
|        | 10.33  |                         |  | Genomic Database Collaboration and License Agreement between
	Registrant and N.V. Organon dated as of December 31,
	1997.(2)(B)                                                                                                                                            
|        | *10.38 |                         |  | Employment Agreement, dated February 17, 1997, between the
	Registrant and Daniel R. Passeri.(2)                                                                                                                                                                           
|        | *10.39 |                         |  | Amendment to Employment Agreement, dated July 9, 1997,
	between the Registrant and Daniel R. Passeri.(2)                                                                                                                                                                   
|        | 10.44  |                         |  | Form of Affiliate Agreement.(3)                                                                                                                                                                                                                                            
|        | *10.45 |                         |  | Amended and Restated Employment Agreement, dated April 1,
	1999, between Registrant and Douglas Dolginow, M.D.(7)                                                                                                                                                          
|        | 10.46  |                         |  | Loan Agreement, dated July 6, 1998, between Registrant and
	Oncormed, Inc.(3)                                                                                                                                                                                              
|        | 10.47  |                         |  | Collaboration Agreement, dated June 30, 1998, between
	Registrant and Hoechst Schering AgrEvo GmbH.(3)(C)                                                                                                                                                                  
|        | 10.48  |                         |  | Letter Agreement, dated December 29, 1998, between
	Registrant and Japan Tobacco Inc.(5)(D)                                                                                                                                                                                
|        | 10.49  |                         |  | Genomic Database Collaboration and License Agreement, dated
	December 30, 1998, between Registrant and Procter &
	Gamble, replacing that certain Target Discovery Collaboration and
	 License Agreement, dated May 27, 1997 between Registrant
	and Procter & Gamble.(5)(D)
|        | 10.50  |                         |  | Agreement, dated January 1, 1999, between Registrant and
	Affymetrix, Inc.(6)(E)                                                                                                                                                                                           
|        | *10.51 |                         |  | Promissory Note, dated April 14, 1999, between the
	Registrant and Michael J. Brennan.(7)                                                                                                                                                                                  

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|        |        |                         |  |                                                                                                                                               
|------- | ------ | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|        | *10.52 |                         |  | Promissory Note, dated April 14, 1999, between the
	Registrant and Mark D. Gessler.(7)                                                        
|        | *10.53 |                         |  | Promissory Note, dated April 8, 1999 between the Registrant
	and Douglas Dolginow.(7)                                                         
|        | *10.54 |                         |  | Pledge and Security Agreement, dated April 8, 1999, between
	the Registrant and Douglas Dolginow.(7)                                          
|        | *10.55 |                         |  | Executive Severance Plan, adopted March 19, 1999.(8)                                                                                          
|        | 10.56  |                         |  | First Amendment to Genomic Database Collaboration and License
	Agreement, executed September 1999, between Registrant and
	N.V. Organon.(8)(F)
|        | 10.57  |                         |  | Letter Agreement, dated September 28, 1999, between
	Registrant and Japan Tobacco, Inc.(8)(F)                                                 
|        | *10.58 |                         |  | Employment Agreement, dated October 11, 1999, between
	Registrant and Philip L. Rohrer, Jr.                                                   
|        | 11.1   |                         |  | Statement re: computation of per share loss.                                                                                                  
|        | 21.1   |                         |  | List of Subsidiaries.(5)                                                                                                                      
|        | 23.1   |                         |  | Consent of Arthur Andersen LLP, Independent Public Accountants.                                                                               
|        | 27.1   |                         |  | Financial Data Schedule.                                                                                                                      




|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Indicates management compensatory plan, contract or arrangement.                                                                                                                 
|   
|(1) | Filed as an exhibit to Registrants Registration Statement
	on Form S-1, filed October 7, 1997, as amended,
	(No. 333-37317) and incorporated herein by reference                
|   
|(2) | Filed as an exhibit to Registrants Report on Form 10-K
	 for the fiscal year ended December 31, 1997, filed on
	March 31, 1998, and incorporated herein by reference.           
|   
|(3) | Filed as an exhibit to Registrants Registration Statement
	on Form S-4 (No.  333-60135), filed on July 29,
	1998, as amended, and incorporated herein by reference.             
|   
|(4) | Filed as an exhibit to Registrants Quarterly Report on
	Form 10-Q for the quarter ended September 30, 1998,
	filed on November  16, 1998, and incorporated herein by
	reference.
|   
|(5) | Filed as an exhibit to Registrants Report on Form 10-K
	 for the fiscal year ended December 31, 1998, filed on
	March 31, 1999, and incorporated herein by reference.           
|   
|(6) | Filed as an exhibit to Registrants Quarterly Report on
	Form 10-Q for the quarter ended March 31, 1999, filed
	on May 14, 1999, and incorporated herein by reference.           
|   
|(7) | Filed as an exhibit to Registrants Quarterly Report on
	Form 10-Q for the quarter ended June 30, 1999, filed on
	 August 13, 1999, and incorporated herein by reference.        
|   
|(8) | Filed as an exhibit to Registrants Quarterly Report on
	Form 10-Q for the quarter ended September 30, 1999,
	filed on November  15, 1999, and incorporated herein by
	reference.



|    |                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Confidential treatment has been granted with respect to certain
	portions of this exhibit pursuant to an Order Granting
	Application Under the Securities Act of 1933 and Rule 406
	Thereunder Respecting Confidential Treatment dated
	November 20, 1997.



|    |                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) | Confidential treatment has been granted with respect to certain
	portions of this exhibit pursuant to an Order Granting
	Application Under the Securities Exchange Act of 1934 and
	Rule 24b-2 Thereunder Respecting Confidential Treatment
	dated May  8, 1998. 
|   
|(C) | Confidential treatment has been granted with respect to certain
	portions of this exhibit pursuant to an Order Granting
	Application Under the Securities Exchange Act of 1933 and
	Rule 406 Thereunder Respecting Confidential Treatment dated
	August 21, 1998.
|   
|(D) | Confidential treatment has been granted with respect to certain
	portions of this exhibit pursuant to an Order Granting
	Application Under the Securities Exchange Act of 1934 and Rule
	24b-2 Thereunder Respecting Confidential Treatment dated June 1,
	1999. 

42



---



##### Table of Contents





|    |                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(E) | Confidential treatment has been granted with respect to certain
	portions of this exhibit pursuant to an Order Granting
	Application Under the Securities Exchange Act of 1934 and Rule
	24b-2 Thereunder Respecting Confidential Treatment dated July 16,
	 1999.
|   
|(F) | Confidential treatment has been requested with respect to certain
	 portions of this exhibit. Omitted portions have been filed
	separately with the Commission.                                                                                                   

(b)  Reports on Form 8-K

During the quarter ended December 31, 1999, the Registrant
did not file any reports on Form 8-K.

43



---



##### Table of Contents






SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 30th day of March, 2000.



| |                
| | ---------------
| | GENE LOGIC INC.



| |     |                                    
| | --- | -----------------------------------
| | By: | /s/ MICHAEL J. BRENNAN, M.D., PH.D.

| |                                
| | -------------------------------
| |                                
| | Michael J. Brennan, M.D., Ph.D.
| | Chief Executive Officer and    
| | Chairman of the Board          

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.

|                                                        |  |                                                                                |  |               
|------------------------------------------------------- |  | ------------------------------------------------------------------------------ |  | --------------
|Name                                                    |  | Position                                                                       |  | Date          
|                                                        |  |                                                                                |  |               
|/s/ MICHAEL J. BRENNAN(Michael J. Brennan, M.D., Ph.D.) |  | Chief Executive Officer and Chairman of the Board(Principal Executive Officer) |  | March 30, 2000
|/s/ MARK D. GESSLER(Mark D. Gessler)                    |  | President, Chief Operating Officer, Secretary and Director                     |  | March 30, 2000
|/s/ PHILIP L. ROHRER, JR.(Philip L. Rohrer, Jr.)        |  | Chief Financial Officer (Principal Financial and Accounting
	Officer)          |  | March 30, 2000
|/s/ JULES BLAKE(Jules Blake, Ph.D.)                     |  | Director                                                                       |  | March 30, 2000
|/s/ CHARLES L. DIMMLER, III(Charles L. Dimmler III)     |  | Director                                                                       |  | March 30, 2000
|/s/ G. ANTHONY GORRY(G. Anthony Gorry, Ph.D.)           |  | Director                                                                       |  | March 30, 2000
|/s/ JEFFREY D. SOLLENDER(Jeffrey D. Sollender)          |  | Director                                                                       |  | March 30, 2000
|/s/ ALAN G. WALTON(Alan G. Walton, Ph.D., D.Sc.)        |  | Director                                                                       |  | March 30, 2000

44



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##### Table of Contents



Gene Logic Inc.

Index to Consolidated Financial Statements


|                                                                                                             |  |      |     | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                             |  | Page
|                                                                                                             |  |     
|Report of Independent Public Accountants                                                                     |  |      | F-2 | 
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Consolidated Balance Sheets as of December 31, 1999 and 1998                                                 |  |      | F-3 | 
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Consolidated Statements of Operations for the Years Ended
        December 31, 1999, 1998 and 1997           |  |      | F-4 | 
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Consolidated Statements of Stockholders Equity for the
        Years Ended December 31, 1999, 1998 and 1997 |  |      | F-5 | 
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Consolidated Statements of Cash Flows for the Years Ended
        December 31, 1999, 1998 and 1997           |  |      | F-6 | 
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Notes to Consolidated Financial Statements                                                                   |  |      | F-7 | 

F-1



---



##### Table of Contents



Report of Independent Public Accountants

To the Board of Directors and Stockholders of Gene Logic Inc. and
 Subsidiary:

We have audited the accompanying consolidated balance sheets of
Gene Logic Inc. (a Delaware corporation) and subsidiary as of
December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders equity and cash
flows for the years ended December 31, 1999, 1998 and 1997.
These financial statements and the schedule referred to below are
 the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
 about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Gene Logic Inc. and subsidiary as of December 31, 1999
and 1998, and the results of their operations and their cash
flows for the years ended December 31, 1999, 1998 and 1997,
in conformity with accounting principles generally accepted in
the United States.

Our audits were made for the purposes of forming an opinion on
the basic consolidated financial statements and schedule taken as
 a whole. Schedule II is presented for purposes of complying
 with the Securities and Exchange Commissions rules and is
not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in
 the audits of the basic consolidated financial statements and,
in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to
the basic consolidated financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP

Baltimore, Maryland



F-2



---



##### Table of Contents



Gene Logic Inc.

Consolidated Balance Sheets

as of December 31, 1999 and 1998


(in thousands, except per share amounts)


|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |         |        | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------ | ------- | ------ |  | ------ | ------- | ------ | 
|                                     |                                                                                                                                                                          | 1999                                       |        | 1998   
|                                     |                                                                                                                                                                          |                                            |        |        
|                                    
|                                    
|                                    
|                                    
|ASSETS                              
|                                    
|                                    
|                                    
|                                    
|Current Assets:                      |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                                                                                                                |                                            | $      | 5,294   |        |  | $      | 16,191  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Marketable securities available-for-sale                                                                                                                                 |                                            |        | 7,152   |        |  |        | 14,791  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Due from collaborators                                                                                                                                                   |                                            |        | 3,549   |        |  |        | 3,779   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Inventory                                                                                                                                                                |                                            |        | 1,735   |        |  |        | 101     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid expenses                                                                                                                                                         |                                            |        | 822     |        |  |        | 741     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Other current assets                                                                                                                                                     |                                            |        | 1,335   |        |  |        | 875     |       
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                     |                                                                                                                                                                          | Total Current Assets                       |        |         | 19,887 |  |        |         | 36,478 | 
|                                    
|                                    
|                                    
|                                    
|Property and Equipment, net          |                                                                                                                                                                          |                                            | 10,527 |         |        |  | 10,189 |        
|                                    
|                                    
|                                    
|                                    
|Long-term Investment                 |                                                                                                                                                                          |                                            | 1,000  |         |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|Notes Receivable from Employees      |                                                                                                                                                                          |                                            | 735    |         |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|Goodwill, net                        |                                                                                                                                                                          |                                            | 5,725  |         |        |  | 7,249  |        
|                                    
|                                    
|                                    
|                                    
|Intangibles and Other Assets, net    |                                                                                                                                                                          |                                            | 3,292  |         |        |  | 1,650  |        
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                     |                                                                                                                                                                          | Total Assets                               |        | $       | 41,166 |  |        | $       | 55,566 | 
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                    
|                                    
|                                    
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|                                    
|                                    
|                                    
|                                    
|Current Liabilities:                 |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                                                                         |                                            | $      | 4,506   |        |  | $      | 2,123   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued expenses                                                                                                                                                         |                                            |        | 2,759   |        |  |        | 2,963   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued restructuring                                                                                                                                                    |                                            |        |        |        |  |        | 184     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of capital lease obligations                                                                                                                             |                                            |        | 192     |        |  |        | 124     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of long-term debt                                                                                                                                        |                                            |        | 1,335   |        |  |        | 1,292   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred revenue                                                                                                                                                         |                                            |        | 5,672   |        |  |        | 3,219   |       
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                     |                                                                                                                                                                          | Total Current Liabilities                  |        |         | 14,464 |  |        |         | 9,905  | 
|                                    
|                                    
|                                    
|                                    
|Capital Lease Obligations            |                                                                                                                                                                          |                                            | 201    |         |        |  | 100    |        
|                                    
|                                    
|                                    
|                                    
|Long-Term Debt                       |                                                                                                                                                                          |                                            | 2,862  |         |        |  | 3,789  |        
|                                    
|                                    
|                                    
|                                    
|Other Noncurrent Liabilities         |                                                                                                                                                                          |                                            | 571    |         |        |  | 484    |        
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                     |                                                                                                                                                                          | Total Liabilities                          |        |         | 18,098 |  |        |         | 14,278 | 
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|Commitments and Contingencies        |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                    
|                                    
|                                    
|                                    
|Stockholders Equity:                |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock, $.01 par value; 10,000,000 shares authorized; no
	 shares issued and outstanding as of December  31, 1999 and
	1998                                     |                                            |        |        |        |  |        |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, $.01 par value; 60,000,000 shares authorized; and
	20,005,688 and 19,651,756 shares issued and outstanding as of
	December 31, 1999 and 1998, respectively |                                            |        | 200     |        |  |        | 197     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                                                                                                               |                                            |        | 103,497 |        |  |        | 102,670 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred compensation on stock options, net                                                                                                                              |                                            |        | (2,488  | )      |  |        | (3,986  | )     
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive loss                                                                                                                                     |                                            |        | (3      | )      |  |        | (46     | )     
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated deficit                                                                                                                                                      |                                            |        | (78,138 | )      |  |        | (57,547 | )     
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                     |                                                                                                                                                                          | Total Stockholders Equity                 |        |         | 23,068 |  |        |         | 41,288 | 
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        
|                                     |                                                                                                                                                                          | Total Liabilities and Stockholders Equity |        | $       | 41,166 |  |        | $       | 55,566 | 
|                                     |                                                                                                                                                                          |                                            |        |         |        |  |        |        

The accompanying notes are an integral part of these consolidated
 balance sheets.

F-3



---



##### Table of Contents



Gene Logic Inc.

Consolidated Statements of Operations

for the Years Ended December 31, 1999, 1998 and 1997


(in thousands, except per share amounts)


|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |       |        |  
|--------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------------- | ------ | ------ | ------- | ---- | ------ | ------ | ------- | - | ----- | ----- | ------ | -
|                                                                      |                                              | 1999                                         |        | 1998   |         | 1997
|                                                                      |                                              |                                              |        |        |         |     
|Revenues                                                              |                                              | $                                            | 19,202 |        |         | $    | 13,197 |        |         | $ | 2,047 |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Expenses:                                                             |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Research and development                     |                                              |        | 29,570 |         |      |        | 16,605 |         |   |       | 6,061 |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | General and administrative                   |                                              |        | 9,194  |         |      |        | 7,552  |         |   |       | 3,825 |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Acquired in-process research and development |                                              |        |       |         |      |        | 35,196 |         |   |       |      |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Amortization of goodwill                     |                                              |        | 1,524  |         |      |        | 381    |         |   |       |      |       
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|                                                                      |                                              | Total expenses                               |        |        | 40,288  |      |        |        | 59,734  |   |       |       | 9,886  |  
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|                                                                      |                                              | Loss from operations                         |        |        | (21,086 | )    |        |        | (46,537 | ) |       |       | (7,839 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest Income, net                                                  |                                              |                                              | 685    |        |         |      | 1,844  |        |         |   | 745   |      
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other Income (Expense)                                                |                                              |                                              | 30     |        |         |      | (80    | )      |         |   |      |      
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|                                                                      |                                              | Loss before income tax expense               |        |        | (20,371 | )    |        |        | (44,773 | ) |       |       | (7,094 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Income Tax Expense                                                    |                                              |                                              | 220    |        |         |      | 100    |        |         |   | 100   |      
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|                                                                      |                                              | Net loss                                     |        |        | (20,591 | )    |        |        | (44,873 | ) |       |       | (7,194 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Accretion of Mandatory Redemption Value of Preferred Stock            |                                              |                                              |       |        |         |      |       |        |         |   | 1,286 |      
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|                                                                      |                                              | Net loss attributable to common stockholders |        | $      | (20,591 | )    |        | $      | (44,873 | ) |       | $     | (8,480 | )
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|Basic and Diluted Net Loss Per Common Share                           |                                              | $                                            | (1.04  | )      |         | $    | (2.86  | )      |         | $ | (3.97 | )    
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      
|Shares Used in Computing Basic and Diluted Net Loss Per Common
	Share |                                              |                                              | 19,833 |        |         |      | 15,681 |        |         |   | 2,138 |      
|                                                                      |                                              |                                              |        |        |         |      |        |        |         |   |       |      

The accompanying notes are an integral part of these consolidated
 statements.

F-4



---



##### Table of Contents



Gene Logic Inc.

Consolidated Statements of Stockholders Equity

for the Years Ended December 31, 1999, 1998 and 1997


(in thousands, except number of shares)


|                              |                                                                                             |                 |           |              |   |                      |        |             |   |         |            |              |   |               |     |             |   |   |         |        |   |   |        |        |   |   |     |     |   |   |         |         |  
|----------------------------- | ------------------------------------------------------------------------------------------- | --------------- | --------- | ------------ | - | -------------------- | ------ | ----------- | - | ------- | ---------- | ------------ | - | ------------- | --- | ----------- | - | - | ------- | ------ | - | - | ------ | ------ | - | - | --- | --- | - | - | ------- | ------- | -
|                              |                                                                                             |                 |           |              |   |                     
|                              |                                                                                             |                 |           |              |   | Stockholders Equity
|                              |                                                                                             |                 |           |             
|                              |                                                                                             | Preferred Stock |           |             
|                              |                                                                                             |                 |           |              |   |                     
|                              |                                                                                             |                 |           | Common Stock |   |                      |        | Accumulated |   |        
|                              |                                                                                             | Number          |           |              |   |                      |        | Additional  |   |         |            | Other        |   |              
|                              |                                                                                             | of              |           |              |   | Number               |        | Par         |   | Paid-In |            | Deferred     |   | Comprehensive |     | Accumulated
|                              |                                                                                             | Shares          |           | Amount       |   | of Shares            |        | Value       |   | Capital |            | Compensation |   | Loss          |     | Deficit    
|                              |                                                                                             |                 |           |              |   |                      |        |             |   |         |            |              |   |               |     |            
|Balance at December  31, 1996 |                                                                                             |                 | 4,836,742 |              |   | $                    | 10,472 |             |   |         | 692,733    |              |   | $             | 7   |             |   | $ | 13      |        |   | $ |       |        |   | $ | (13 | )   |   | $ | (4,194  | )      
|                             
|                             
|                             
|                             
|                              | Issuance of Series C Convertible Preferred Stock, net of
	issuance costs                    |                 |           | 4,444,443    |   |                      |        | 19,117      |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Cancellation of common stock                                                                |                 |           |             |   |                      |        |            |   |         |            | (55,000      | ) |               |     | (1          | ) |   |         | (8     | ) |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of stock
	options                      |                 |           |             |   |                      |        |            |   |         |            | 152,943      |   |               |     | 2           |   |   |         | 22     |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock                                                                    |                 |           |             |   |                      |        |            |   |         |            | 425,000      |   |               |     | 4           |   |   |         | 3,003  |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of warrants                                                                        |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         | 43     |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Accretion of mandatory redemption value of preferred stock                                  |                 |           |             |   |                      |        | 1,286       |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         | (1,286  | )
|                             
|                             
|                             
|                             
|                              | Conversion of preferred stock to common stock in connection with
	initial public offering   |                 |           | (9,281,185   | ) |                      |        | (30,875     | ) |         |            | 9,281,185    |   |               |     | 93          |   |   |         | 30,782 |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with initial public
	offering, net of issuance costs |                 |           |             |   |                      |        |            |   |         |            | 3,347,000    |   |               |     | 33          |   |   |         | 23,911 |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of warrants                            |                 |           |             |   |                      |        |            |   |         |            | 55,389       |   |               |     | 1           |   |   |         | 219    |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Net change in unrealized losses from marketable securities                                  |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     | 11  |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Deferred compensation from stock options                                                    |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         | 6,897  |   |   |        | (6,897 | ) |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                                                       |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        | 619    |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Net loss                                                                                    |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         | (7,194  | )
|                             
|                             
|                             
|                             
|                              | Comprehensive loss                                                                          |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         |        |  
|                              |                                                                                             |                 |           |              |   |                      |        |             |   |         |            |              |   |               |     |             |   |   |         |        |   |   |        |        |   |   |     |     |   |   |         |        
|Balance at December  31, 1997 |                                                                                             |                 |          |              |   |                      |       |             |   |         | 13,899,250 |              |   |               | 139 |             |   |   | 64,882  |        |   |   | (6,278 | )      |   |   | (2  | )   |   |   | (12,674 | )      
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of stock
	options                      |                 |           |             |   |                      |        |            |   |         |            | 875,636      |   |               |     | 9           |   |   |         | 197    |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with Employee Stock
	Purchase Plan                   |                 |           |             |   |                      |        |            |   |         |            | 27,290       |   |               |     |            |   |   |         | 140    |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with acquisition of
	Oncormed, Inc                   |                 |           |             |   |                      |        |            |   |         |            | 4,849,580    |   |               |     | 49          |   |   |         | 38,166 |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Net changes in unrealized losses from marketable securities                                 |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     | (44 | ) |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Write-off of cancelled stock options                                                        |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         | (715   | ) |   |        | 715    |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                                                       |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        | 1,577  |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Net loss                                                                                    |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         | (44,873 | )
|                             
|                             
|                             
|                             
|                              | Comprehensive loss                                                                          |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         |        |  
|                              |                                                                                             |                 |           |              |   |                      |        |             |   |         |            |              |   |               |     |             |   |   |         |        |   |   |        |        |   |   |     |     |   |   |         |        
|Balance at December  31, 1998 |                                                                                             |                 |          |              |   |                      |       |             |   |         | 19,651,756 |              |   |               | 197 |             |   |   | 102,670 |        |   |   | (3,986 | )      |   |   | (46 | )   |   |   | (57,547 | )      
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of stock
	options                      |                 |           |             |   |                      |        |            |   |         |            | 249,860      |   |               |     | 2           |   |   |         | 498    |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with Employee Stock
	Purchase Plan                   |                 |           |             |   |                      |        |            |   |         |            | 62,766       |   |               |     | 1           |   |   |         | 269    |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of warrants                            |                 |           |             |   |                      |        |            |   |         |            | 41,306       |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Issuance of stock options to consultants                                                    |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         | 60     |   |   |        |       |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Net changes in unrealized losses from marketable securities                                 |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     | 43  |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                                                       |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        | 1,498  |   |   |     |    |   |   |         |        |  
|                             
|                             
|                             
|                             
|                              | Net loss                                                                                    |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         | (20,591 | )
|                             
|                             
|                             
|                             
|                              | Comprehensive loss                                                                          |                 |           |             |   |                      |        |            |   |         |            |             |   |               |     |            |   |   |         |       |   |   |        |       |   |   |     |    |   |   |         |        |  
|                              |                                                                                             |                 |           |              |   |                      |        |             |   |         |            |              |   |               |     |             |   |   |         |        |   |   |        |        |   |   |     |     |   |   |         |        
|Balance at December  31,1999  |                                                                                             |                 |          |              |   | $                    |       |             |   |         | 20,005,688 |              |   | $             | 200 |             |   | $ | 103,497 |        |   | $ | (2,488 | )      |   | $ | (3  | )   |   | $ | (78,138 | )      
|                              |                                                                                             |                 |           |              |   |                      |        |             |   |         |            |              |   |               |     |             |   |   |         |        |   |   |        |        |   |   |     |     |   |   |         |        

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                              |                                                                                             |               |   |         |  
|----------------------------- | ------------------------------------------------------------------------------------------- | ------------- | - | ------- | -
|                              |                                                                                             | Comprehensive
|                              |                                                                                             | Loss         
|                              |                                                                                             |              
|Balance at December  31, 1996 |                                                                                             |               |   |        
|                             
|                             
|                             
|                             
|                              | Issuance of Series C Convertible Preferred Stock, net of
	issuance costs                    |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Cancellation of common stock                                                                |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of stock
	options                      |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock                                                                    |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of warrants                                                                        |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Accretion of mandatory redemption value of preferred stock                                  |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Conversion of preferred stock to common stock in connection with
	initial public offering   |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with initial public
	offering, net of issuance costs |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of warrants                            |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Net change in unrealized losses from marketable securities                                  |               | $ | 11      |  
|                             
|                             
|                             
|                             
|                              | Deferred compensation from stock options                                                    |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                                                       |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Net loss                                                                                    |               |   | (7,194  | )
|                              |                                                                                             |               |   |        
|                              | Comprehensive loss                                                                          |               | $ | (7,183  | )
|                              |                                                                                             |               |   |        
|Balance at December  31, 1997 |                                                                                             |               |   |        
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of stock
	options                      |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with Employee Stock
	Purchase Plan                   |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with acquisition of
	Oncormed, Inc                   |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Net changes in unrealized losses from marketable securities                                 |               | $ | (44     | )
|                             
|                             
|                             
|                             
|                              | Write-off of cancelled stock options                                                        |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                                                       |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Net loss                                                                                    |               |   | (44,873 | )
|                              |                                                                                             |               |   |        
|                              | Comprehensive loss                                                                          |               | $ | (44,917 | )
|                              |                                                                                             |               |   |        
|Balance at December  31, 1998 |                                                                                             |               |   |        
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of stock
	options                      |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with Employee Stock
	Purchase Plan                   |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of common stock in connection with exercise of warrants                            |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Issuance of stock options to consultants                                                    |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Net changes in unrealized losses from marketable securities                                 |               | $ | 43      |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                                                       |               |   |         |  
|                             
|                             
|                             
|                             
|                              | Net loss                                                                                    |               |   | (20,591 | )
|                              |                                                                                             |               |   |        
|                              | Comprehensive loss                                                                          |               | $ | (20,548 | )
|                              |                                                                                             |               |   |        
|Balance at December  31,1999  |                                                                                             |               |   |        

The accompanying notes are an integral part of these consolidated
 statements.

F-5



---



##### Table of Contents



Gene Logic Inc.

Consolidated Statements of Cash Flows

for the Years Ended December 31, 1999, 1998 and 1997


(in thousands)


|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |        |        |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------ | ------ | ------ | ------ | -
|                                                     |                                                                                 | 1999                                         |                                          | 1998    |        | 1997   
|                                                     |                                                                                 |                                              |                                          |         |        |        
|Cash Flows From Operating Activities:                |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net loss                                                                        |                                              | $                                        | (20,591 | )      |         | $       | (44,873 | )      |         | $      | (7,194 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net loss to net cash flows from
	operating activities: |                                              |                                          |         |        |         |         |         |        |         |        |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Acquired in-process research and development |                                          |         |       |         |         |         | 35,196 |         |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Amortization of goodwill                     |                                          |         | 1,524  |         |         |         | 381    |         |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Depreciation and amortization                |                                          |         | 3,391  |         |         |         | 1,760  |         |        |        | 632    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Amortization of deferred compensation        |                                          |         | 1,498  |         |         |         | 1,577  |         |        |        | 619    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Issuance of stock options to consultants     |                                          |         | 60     |         |         |         |       |         |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Cancellation of notes receivable             |                                          |         |       |         |         |         |       |         |        |        | 95     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Loss on disposal of property and equipment   |                                          |         |       |         |         |         | 80     |         |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Amount due under research agreement          |                                          |         |       |         |         |         |       |         |        |        | 48     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in operating assets and liabilities (net of effects of
	acquisition):   |                                              |                                          |         |        |         |         |         |        |         |        |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Due from collaborators                       |                                          |         | 230    |         |         |         | (2,706 | )       |        |        | (1,000 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Inventory                                    |                                          |         | (1,634 | )       |         |         | (101   | )       |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Prepaid expenses                             |                                          |         | (81    | )       |         |         | (193   | )       |        |        | (444   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Other current assets                         |                                          |         | (417   | )       |         |         | 67     |         |        |        | (823   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Intangibles and other assets                 |                                          |         | (1,842 | )       |         |         | (971   | )       |        |        | (642   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Accounts payable                             |                                          |         | 2,383  |         |         |         | 1,401  |         |        |        | 90     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Accrued expenses                             |                                          |         | (204   | )       |         |         | 450    |         |        |        | 373    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Accrued restructuring                        |                                          |         | (184   | )       |         |         | (1,163 | )       |        |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Deferred revenue                             |                                          |         | 1,453  |         |         |         | (1,247 | )       |        |        | 4,436  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                 | Other noncurrent liabilities                 |                                          |         | 87     |         |         |         | 118    |         |        |        | 408    |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                     |                                                                                 |                                              | Net Cash Flows From Operating Activities |         |        | (14,327 | )       |         |        | (10,224 | )      |        |        | (3,402 | )
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|Cash Flows From Investing Activities:                |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property and equipment                                             |                                              |                                          | (3,229  | )      |         |         | (6,873  | )      |         |        | (3,069 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Increase in notes receivable from employees                                     |                                              |                                          | (778    | )      |         |         |        |        |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payment of acquisition costs, net of cash acquired                              |                                              |                                          |        |        |         |         | (755    | )      |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Pre-acquisition advances to Oncormed, Inc                                       |                                              |                                          |        |        |         |         | (1,843  | )      |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of marketable securities available-for-sale                            |                                              |                                          |        |        |         |         | (14,737 | )      |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sale and maturity of marketable securities
	available-for-sale    |                                              |                                          | 7,682   |        |         |         |        |        |         |        | 4,447  |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                     |                                                                                 |                                              | Net Cash Flows From Investing Activities |         |        | 3,675   |         |         |        | (24,208 | )      |        |        | 1,378  |  
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|Cash Flows From Financing Activities:                |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from issuance of common stock                                          |                                              |                                          | 770     |        |         |         | 346     |        |         |        | 30,019 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from issuance of preferred stock                                       |                                              |                                          |        |        |         |         |        |        |         |        | 20,000 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments for stock issuance costs                                               |                                              |                                          |        |        |         |         |        |        |         |        | (3,714 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from equipment loans                                                   |                                              |                                          |        |        |         |         | 4,765   |        |         |        | 1,084  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from note payable                                                      |                                              |                                          | 425     |        |         |         |        |        |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from financing agreement                                               |                                              |                                          |        |        |         |         |        |        |         |        | 281    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of financing agreement                                               |                                              |                                          | (98     | )      |         |         | (183    | )      |         |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of capital lease obligations and equipment loans                     |                                              |                                          | (1,342  | )      |         |         | (827    | )      |         |        | (261   | )     
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                     |                                                                                 |                                              | Net Cash Flows From Financing Activities |         |        | (245    | )       |         |        | 4,101   |        |        |        | 47,409 |  
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|Net (Decrease) Increase in Cash and Cash Equivalents |                                                                                 |                                              | (10,897                                  | )       |        |         | (30,331 | )       |        |         | 45,385 |       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, beginning of period       |                                                                                 |                                              | 16,191                                   |         |        |         | 46,522  |         |        |         | 1,137  |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|Cash and Cash Equivalents, end of period             |                                                                                 | $                                            | 5,294                                    |         |        | $       | 16,191  |         |        | $       | 46,522 |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|Supplemental Disclosure:                             |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest paid                                                                   |                                              | $                                        | 415     |        |         | $       | 271     |        |         | $      | 97     |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|Non-Cash Transactions:                               |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock in acquisition                                         |                                              | $                                        |        |        |         | $       | 38,215  |        |         | $      |       |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                     | Equity investment                                                               |                                              | $                                        | 1,000   |        |         | $       |        |        |         | $      |       |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                     | Equipment acquired under capital lease                                          |                                              | $                                        | 300     |        |         | $       |        |        |         | $      |       |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       
|                                                     | Issuance of warrants to lessor                                                  |                                              | $                                        |        |        |         | $       |        |        |         | $      | 43     |       
|                                                     |                                                                                 |                                              |                                          |         |        |         |         |         |        |         |        |       

The accompanying notes are an integral part of these consolidated
 statements.

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##### Table of Contents



Gene Logic Inc.

Notes to Consolidated Financial Statements

December 31, 1999, 1998 and 1997

Note 1  Organization and Summary of Significant
Accounting Policies

Organization and Business

Gene Logic Inc. (the Company) was incorporated in
Delaware on September 22, 1994. The Company, a leading
provider of genomic information, is enabling the discovery and
development of pharmaceutical, biotechnology and life science
products through the systematic and industrialized application of
 genomics. The Company markets two types of gene expression
database products to the global pharmaceutical, healthcare and
life science industries: its custom databases and related
software products and its new GeneExpress reference
database suite. The Companys genomic information products
combine sophisticated data management software tools with
large-scale gene expression information, which specifies the
degree to which genes are active in a broad range of normal,
diseased and treated conditions. This combination enables
scientists to produce new biological knowledge by integrating
this proprietary gene expression information with their own
in-house data, as well as with the gene sequence and other
biological information publicly available on the Internet. The
Companys broad range of genomics information products
enables customers to accelerate the discovery and development
process of new drugs, diagnostics and agricultural products.

Principles of Consolidation

The consolidated financial statements include the accounts of
Gene Logic Inc. and its wholly owned subsidiary. All material
intercompany accounts and transactions have been eliminated in
consolidation.

In September 1998, the Companys wholly owned
subsidiary, Gene Logic Acquisition Corp., merged with Oncormed,
Inc. (Oncormed), a publicly traded genomics company,
and issued 4,849,580 (reduced for fractional shares) shares of
the Companys Common Stock. The acquisition of Oncormed has
been accounted for as a purchase, and the consolidated financial
statements herein reflect the inclusion of the operating results
of Gene Logic Acquisition Corp. since the acquisition date.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses in the financial
statements and in the disclosures of contingent assets and
liabilities. While actual results could differ from those
estimates, management believes that actual results will not be
materially different from amounts provided in the accompanying
financial statements.

Comprehensive Loss

The Company accounts for comprehensive loss as prescribed by
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (SFAS
No. 130). Comprehensive income is the total net income
 (loss) plus all changes in equity during the period except
those changes resulting from investment by owners and
distribution to owners. The Companys comprehensive loss
includes

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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 1  Organization and Summary of Significant
Accounting Policies  (Continued)

unrealized holding losses from marketable securities
available-for-sale for the years ended December 31, 1999,
1998 and 1997, is comprised of:


|                                               |                                                    |                                         |         |      |    |      |         |     |     |   |        |    |    | 
|---------------------------------------------- | -------------------------------------------------- | --------------------------------------- | ------- | ---- | -- | ---- | ------- | --- | --- | - | ------ | -- | -- | 
|                                               |                                                    | 1999                                    |         | 1998 |    | 1997
|                                               |                                                    |                                         |         |      |    |     
|Net loss                                       |                                                    | $                                       | (20,591 | )    |    | $    | (44,873 | )   |     | $ | (7,194 | ) 
|                                              
|                                              
|                                              
|                                              
|Other comprehensive income (loss), net of tax: |                                                    |                                         |         |      |    |      |         |     |     |   |        |   
|                                              
|                                              
|                                              
|                                              
|                                               | Unrealized gains (losses) on marketable securities |                                         |         | 43   |    |      |         | (46 | )   |   |        | (4 | ) 
|                                              
|                                              
|                                              
|                                              
|                                               | Less  Reclassification adjustment for losses      |                                         |         |     |    |      |         | 2   |     |   |        | 15 |   
|                                               |                                                    |                                         |         |      |    |      |         |     |     |   |        |   
|                                               |                                                    | Total other comprehensive income (loss) |         |      | 43 |      |         |     | (44 | ) |        |    | 11 | 
|                                               |                                                    |                                         |         |      |    |      |         |     |     |   |        |   
|Comprehensive loss                             |                                                    | $                                       | (20,548 | )    |    | $    | (44,917 | )   |     | $ | (7,183 | ) 
|                                               |                                                    |                                         |         |      |    |      |         |     |     |   |        |   

Concentration of Credit Risk

Cash, cash equivalents and marketable securities
available-for-sale are financial instruments which potentially
subject the Company to concentrations of credit risk. The
estimated fair value of financial instruments approximates the
carrying value based on available market information. The Company
 primarily invests its excess available funds in corporate debt
securities, commercial paper and bonds, and notes and bonds
issued by the U.S. government and its agencies and, by policy,
seeks to ensure both liquidity and safety of principal. The
policy also limits investments to certain types of instruments
issued by institutions with strong investment grade credit
ratings and places restrictions on their terms, geographic origin
 and concentrations by type and issuer.

Cash and Cash Equivalents

Cash and cash equivalents are defined as liquid investments with
original maturities of 90 days or less that are readily
convertible into cash. All other investments are reported as
marketable securities available-for-sale. Cash and cash
equivalents as of December 31, 1999 and 1998, are comprised
of:

|                           |       |                |       |       |  |   |        |        | 
|-------------------------- | ----- | -------------- | ----- | ----- |  | - | ------ | ------ | 
|                           |       | 1999           |       | 1998 
|                           |       |                |       |      
|                           |       |               
|                           |       | (in thousands)
|                          
|                          
|                          
|                          
|Cash                       |       | $              | 1,607 |       |  | $ | 1,077  |       
|                          
|                          
|                          
|                          
|Corporate commercial paper |       |                | 3,687 |       |  |   | 15,114 |       
|                           |       |                |       |       |  |   |        |       
|                           | Total |                | $     | 5,294 |  |   | $      | 16,191 | 
|                           |       |                |       |       |  |   |        |       

Marketable Securities Available-for-Sale

All marketable securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with
unrealized gains and losses reported as a separate component of
stockholders equity. Realized gains and losses and declines
 in value judged to be other than temporary for
available-for-sale securities are included in other income.

Inventory

Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventory
consists primarily of Affymetrix GeneChips® used in the
production of gene expression information associated with the
Companys GeneExpress database suite. At December 31,
1999 and 1998, inventory is classified as raw materials.

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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 1  Organization and Summary of Significant
Accounting Policies  (Continued)

Property and Equipment

Property and equipment is carried at cost, less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets as follows:

|                               |  |          
|------------------------------ |  | ---------
|                              
|                              
|                              
|                              
|Furniture and fixtures         |  | 10 years 
|                              
|                              
|                              
|                              
|Computers and office equipment |  | 1-5 years
|                              
|                              
|                              
|                              
|Lab equipment                  |  | 5 years  

Equipment under capital leases and leasehold improvements are
depreciated and amortized over their useful lives, or the term of
 the lease, whichever is shorter.

Long-Term Investment

Under an agreement with Therapeutic Genomics, Inc.
(TGI), the Company received convertible preferred
stock in 1999. The Company accounts for this investment under the
 cost method of accounting, as the Company holds less than 10% of
 TGIs voting stock outstanding under such arrangement and
does not exert significant influence over TGI (See Note 16).

Goodwill

Goodwill, from the acquisition of Oncormed, represents the excess
 of the purchase price over the fair market value of the net
assets acquired. Goodwill is being amortized over five years at a
 rate of approximately $1.5 million per year. Amortization
expense was $1.5 million and $381,000 for the years ended
December 31, 1999 and 1998, respectively. Accumulated
amortization of goodwill was $1.9 million and $381,000 as of
 December 31, 1999 and 1998, respectively.

Intangibles and Other Assets

Intangibles and other assets consists primarily of software
development costs, patent costs, trademarks and licenses. Patent
costs, trademarks and licenses are being amortized over periods
of approximately five to seventeen years. Accumulated
amortization relating to these intangibles and other assets was
$276,000 and $115,000 as of December 31, 1999 and 1998,
respectively. The Companys success is heavily dependent
upon its proprietary technologies. The Company depends upon a
combination of patents, trade secrets, copyright and trademark
laws, license agreements, nondisclosure and other contractual
provisions and various other security measures to protect its
technology rights.

In accordance with the provisions of the Financial Accounting
Standards Board Statement No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, beginning in 1999 the Company has capitalized
certain software development costs incurred in developing certain
 products upon the demonstration of technological feasibility.
The Company recorded capitalized software costs of
$1.2 million as of December 31, 1999. Software
development costs are being amortized over three years using the
straight-line method. Amortization of such costs commenced upon
the completion of the first commercial version of the GeneExpress
 database suite in November 1999. Amortization expense was
$40,000 for the year ended December 31, 1999. Accumulated
amortization of software development costs was $40,000 at
December 31, 1999.

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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 1  Organization and Summary of Significant
Accounting Policies  (Continued)

Research and Development

Research and development costs are charged to operations when
incurred or acquired (See Note 7).

Revenue Recognition

Technology and database access fees are recognized evenly over
the term of the Companys collaboration agreements. Revenues
 from research and development support are recognized when they
are earned and is ordinarily when the work is performed or costs
are incurred. Milestone payments are recognized as revenue in
accordance with the applicable performance requirements and
contractual terms. Revenues from pharmacogenomic services are
recognized upon completion of the services. Subscription fees to
the GeneExpress database suite are recognized evenly over the
term of the subscription. Revenues for such amounts are deferred
until earned.

Nonrefundable upfront payments received for the value of data
purchased, transferred technology or other contractual rights
that are not contingent upon future performance under the terms
of the collaboration agreements are recognized as revenue when
earned. Under collaboration agreements in which the Company
creates a research database in exchange for a fixed fee, revenues
 from such collaborations are recognized on the
percentage-of-completion method.

In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements(SAB 101).
SAB 101 is based upon existing accounting rules and provides
 specific guidance on how those accounting rules should be
applied and specifically addresses revenue recognition for
nonrefundable technology access fees in the biotechnology
industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. The Company is currently in the process
of evaluating SAB 101 and what effect it may have on the
Companys financial statements. Accordingly, the Company has
 not determined whether SAB 101 will have a material impact on
the financial position or results of operations of the Company.

Income Taxes

The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS
No. 109). Under the asset and liability method of SFAS
 No. 109, deferred tax assets and liabilities are recognized
 for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and net
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS
No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in operations in the
period that includes the enactment date.

Basic and Diluted Net Loss Per Common Share

Net loss per common share is computed using the weighted average
number of shares of common stock outstanding. Common equivalent
shares from all outstanding stock options and warrants are
excluded from the computation, as their effect is antidilutive.

Stock Option Plans

Prior to January 1, 1996, the Companys policy was to
account for its stock option plans in accordance with the
provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock

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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 1  Organization and Summary of Significant
Accounting Policies  (Continued)

Issued to Employees (APB Opinion
No. 25), and related interpretations. As such,
compensation expense is recorded on the date of grant only if the
 current fair value of the underlying stock exceeds the exercise
price. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, Accounting for
 Stock-Based Compensation (SFAS No. 123),
which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net earnings and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and
future years as if the fair-value based method defined in SFAS
No. 123 had been applied. The Company elected to continue to
 apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123. The Company
 uses the Black-Scholes option pricing model to estimate the fair
 value of options and warrants granted.


Reclassifications

Certain reclassifications have been made to the prior years
 financial statements to conform with the current year
presentation.

Note 2  Marketable Securities

The following is a summary of the Companys investment
portfolio as of December 31, 1999 and 1998:

|                  |                            |                |   |            |        |       |   |     |     |   |   |        |        | 
|----------------- | -------------------------- | -------------- | - | ---------- | ------ | ----- | - | --- | --- | - | - | ------ | ------ | 
|                  |                            |                |   | Gross      |        |      
|                  |                            | Amortized      |   | Unrealized |        | Fair 
|                  |                            | Cost           |   | Losses     |        | Value
|                  |                            |                |   |            |        |      
|                  |                            |               
|                  |                            | (in thousands)
|December 31, 1999 |                            |                |   |            |        |       |   |     |     |   |   |       
|                 
|                 
|                 
|                 
|                  | Corporate commercial bonds |                | $ | 7,155      |        |       | $ | (3  | )   |   | $ | 7,152  |       
|                 
|                 
|                 
|                 
|                  | Government securities      |                |   |           |        |       |   |    |     |   |   |       |       
|                  |                            |                |   |            |        |       |   |     |     |   |   |       
|                  |                            | Total          |   | $          | 7,155  |       |   | $   | (3  | ) |   | $      | 7,152  | 
|                  |                            |                |   |            |        |       |   |     |     |   |   |       
|December 31, 1998 |                            |                |   |            |        |       |   |     |     |   |   |       
|                 
|                 
|                 
|                 
|                  | Corporate commercial bonds |                | $ | 13,324     |        |       | $ | (46 | )   |   | $ | 13,278 |       
|                 
|                 
|                 
|                 
|                  | Government securities      |                |   | 1,513      |        |       |   |    |     |   |   | 1,513  |       
|                  |                            |                |   |            |        |       |   |     |     |   |   |       
|                  |                            | Total          |   | $          | 14,837 |       |   | $   | (46 | ) |   | $      | 14,791 | 
|                  |                            |                |   |            |        |       |   |     |     |   |   |       

At December 31, 1999, all marketable securities had
maturities greater than one year, but less than eighteen months.
As of December 31, 1999 and 1998, all of the Companys
investments were classified as current as the Company may not
hold its investments until maturity in order to take advantage of
 market conditions.

Note 3  Notes Receivable from Employees

During April 1999, the Company issued promissory notes to
three officers of the Company totaling $750,000 to offset tax
liabilities for unrealized capital gains resulting from stock
option exercises. One of the notes is required to be repaid in
four equal annual installments together with accrued interest.
The other two notes are due and payable in April 2004. All
promissory notes bear interest at 5.25% and are collaterally
secured. At December 31, 1999, the Company estimates the
total fair value of such promissory

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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)



Note 3  Notes Receivable from Employees 
 (Continued)


notes to approximate $663,000 using a discounted cash flow
analysis. In February 2000, two notes aggregating $600,000
plus accrued interest to date were repaid.

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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 4  Property and Equipment

Property and equipment includes the following as of
December 31, 1999 and 1998:

|                                   |  |                |        |      |  |   |        |  
|---------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                   |  | 1999           |        | 1998
|                                   |  |                |        |     
|                                   |  |               
|                                   |  | (in thousands)
|                                  
|                                  
|                                  
|                                  
|Furniture and fixtures             |  | $              | 998    |      |  | $ | 969    |  
|                                  
|                                  
|                                  
|                                  
|Computers and office equipment     |  |                | 5,499  |      |  |   | 4,055  |  
|                                  
|                                  
|                                  
|                                  
|Lab equipment                      |  |                | 5,998  |      |  |   | 4,403  |  
|                                  
|                                  
|                                  
|                                  
|Lab equipment under capital leases |  |                | 771    |      |  |   | 471    |  
|                                  
|                                  
|                                  
|                                  
|Leasehold improvements             |  |                | 2,720  |      |  |   | 2,571  |  
|                                   |  |                |        |      |  |   |        |  
|                                   |  |                | 15,986 |      |  |   | 12,469 |  
|                                  
|                                  
|                                  
|                                  
|Less  Accumulated depreciation    |  |                | (5,459 | )    |  |   | (2,280 | )
|                                   |  |                |        |      |  |   |        |  
|Property and Equipment, net        |  | $              | 10,527 |      |  | $ | 10,189 |  
|                                   |  |                |        |      |  |   |        |  

Depreciation expense was $3,191,000, $1,664,000 and $616,000 for
the years ended December 31, 1999, 1998 and 1997,
respectively.

Note 5  Accrued Expenses

Accrued expenses consists of the following as of
December 31, 1999 and 1998:

|                            |       |                |       |       |  |   |       |       | 
|--------------------------- | ----- | -------------- | ----- | ----- |  | - | ----- | ----- | 
|                            |       | 1999           |       | 1998 
|                            |       |                |       |      
|                            |       |               
|                            |       | (in thousands)
|                           
|                           
|                           
|                           
|Property additions          |       | $              | 78    |       |  | $ | 1,036 |      
|                           
|                           
|                           
|                           
|Professional fees           |       |                | 781   |       |  |   | 757   |      
|                           
|                           
|                           
|                           
|Payroll, taxes and benefits |       |                | 1,788 |       |  |   | 1,128 |      
|                           
|                           
|                           
|                           
|Consulting                  |       |                | 112   |       |  |   | 42    |      
|                            |       |                |       |       |  |   |       |      
|                            | Total |                | $     | 2,759 |  |   | $     | 2,963 | 
|                            |       |                |       |       |  |   |       |      

Note 6  License Arrangements

The proprietary rights and technical information covered by
various patent and patent applications have been licensed by the
Company from third parties. These licenses will continue for the
life of the respective patent or until terminated by either
party. The license costs are being amortized over the useful life
 of the related patents. The agreements call for the payment of
royalties over the life of the patents or a shorter life if no
patents are issued.

Note 7  Acquisition

On September 28, 1998, the merger (the Merger)
of Gene Logic Acquisition Corp., a wholly owned subsidiary of the
 Company, and Oncormed, a publicly held genomics company
providing pharmacogenomic services and developing databases for
use primarily in pharmaceutical research and development, was
completed. As a result of the Merger, Gene Logic Acquisition
Corp. is the surviving corporation and Oncormed has ceased to
exist. In connection with the Merger, the Company issued
4,849,580 (reduced for fractional shares) shares of its Common
Stock in exchange for all of the capital stock of Oncormed. In
addition, outstanding warrants for shares of Oncormed were
converted into warrants for the Companys Common Stock at
exercise prices ranging from $14.77 to $28.89 per share. No value
 has been included in the purchase price allocation for the
warrants assumed because their value, calculated

F-13



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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)



Note 7  Acquisition  (Continued)


using the Black-Scholes model, is immaterial. All outstanding
Oncormed preferred stock was converted into Common Stock of the
Company upon the consummation of the Merger, and no stock options
 were assumed by the Company in the Merger.

The Merger has been accounted for as a purchase transaction and,
accordingly, the purchase price of approximately
$39.2 million was allocated to certain assets and
liabilities based on their respective fair market values. The
excess of the purchase price over the estimated fair market value
 of the net assets acquired was accounted for as goodwill. The
amount allocated to goodwill, approximately $7.6 million,
will be amortized on a straight-line basis over five years.
Allocations were made to certain intangible assets, including
work force, and to in-process research and
development consisting of technologies which had not
reached technological feasibility and had no alternative future
use, including in-process technologies relating to genomic
databases and pharmacogenomics. The write-off of in-process
research and development resulted in a non-recurring charge to
the Companys operating results of $35.2 million, or
$2.24 per share basic and diluted for the year ended
December 31, 1998. The amount charged to earnings was
determined by estimating the costs to develop the in-process
technologies into commercially viable products, estimating the
resulting net cash flows from such projects and discounting the
net cash flows back to their present value. The discount rate
includes a factor that takes into account the uncertainty
surrounding the successful development of the acquired in-process
 technologies. If these projects are not successfully developed,
future results of operations of the Company may be adversely
affected. Additionally, the value of other intangible assets
acquired may become impaired.

Note 8  Accrued Restructuring

In connection with the Merger, the Company recorded a
restructuring liability of approximately $1.6 million to
integrate Oncormed into the Company following the acquisition.
The objective of the restructuring plan was to eliminate
redundant general and administrative employees of Oncormed and
terminate contracts that the Company deemed to have no on-going
economic value to the Company. The restructuring liability
consisted of $373,000 in costs associated with the involuntary
termination of ten Oncormed employees and approximately
$1.2 million in contract termination costs, including the
termination of a certain agreement with Incyte Pharmaceuticals,
Inc. (Incyte) in which the Company repaid $924,000
that had been prepaid by Incyte. This liability has been included
 in the purchase price allocation performed in connection with
the Merger. The restructuring activities were substantially
completed in 1999.

The following table details the major components of the
restructuring liability relating to the Oncormed acquisition:

|                             |  |                |      |             |  |       |        |   |  |   |        |  
|---------------------------- |  | -------------- | ---- | ----------- |  | ----- | ------ | - |  | - | ------ | -
|                             |  |                |      | Contract    |  |      
|                             |  |                |      | Termination |  |      
|                             |  | Personnel      |      | Costs       |  | Total
|                             |  |                |      |             |  |      
|                             |  |               
|                             |  | (in thousands)
|                            
|                            
|                            
|                            
|Restructuring Liability      |  | $              | 373  |             |  | $     | 1,224  |   |  | $ | 1,597  |  
|                            
|                            
|                            
|                            
|1998 Activity                |  |                | (239 | )           |  |       | (1,174 | ) |  |   | (1,413 | )
|                             |  |                |      |             |  |       |        |   |  |   |        |  
|Balance at December 31, 1998 |  |                | 134  |             |  |       | 50     |   |  |   | 184    |  
|                            
|                            
|                            
|                            
|1999 Activity                |  |                | (134 | )           |  |       | (50    | ) |  |   | (184   | )
|                             |  |                |      |             |  |       |        |   |  |   |        |  
|Balance at December 31, 1999 |  | $              |     |             |  | $     |       |   |  | $ |       |  
|                             |  |                |      |             |  |       |        |   |  |   |        |  

F-13



---



##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 9  Collaboration Agreements

As of December 31, 1999, the Company had one subscription
agreement for its GeneExpress database suite and twelve
collaboration agreements for custom gene expression and other
genomic databases and data management software of which eleven
are major pharmaceutical and life science technology companies
and one is a major agricultural company. Five of these agreements
 provide the Company with various technology and database access
fees, research funding and upfront payments. These five
agreements provide for additional payments upon attainment of
research and product development milestones and royalty payments
based on sales of any products that result from use of the
Companys technology or proprietary database information.
The Company also has a collaboration agreement with a
pharmaceutical company for the development of a database for
predicting drug toxicity. Under the agreement, the Company may
license the database and other products developed pursuant to the
 agreement to third party customers. In addition, the Company has
 agreements with a major pharmaceutical company and a life
science technology company for bioinformatic software, database
development, and data integration. Under those agreements, we
receive annual software license fees and development fees. The
Company has four additional agreements with major pharmaceutical
companies in which the Company receives fees for gene expression
and genomic analysis of samples for the profiling of drugs both
at the preclinical and clinical trial stages of development.

The Companys collaboration agreements can provide the right
 for early termination. The loss of revenues from any individual
collaboration, if terminated, could have a material adverse
effect on the Companys business, financial condition and
results of operations.

In September 1999 and January 2000, the Company signed amendments
 to a Collaboration and License Agreement entered into in 1997
with Organon, a significant custom database customer. The
amendments enable both parties to limit the scope and accelerate
the date of termination of the original agreement. At the time of
 the amendment, the Company discontinued recognizing revenue
related to the agreement, pending a determination by Organon
whether to terminate the agreement. As amended, Organon can
terminate the agreement effective as of September 15, 2000.
In consideration to allow early termination by Organon, which
would result in the elimination of its obligation to provide
future financial and other support for the collaboration, Organon
 agreed to grant the Company an exclusive perpetual license upon
any such early termination for data developed pursuant to such
agreement. Management believes this data has significant value
and would significantly enhance the Companys GeneExpress
database suite. If Organon terminates the agreement early,
Organon must pay $2.0 million owed to the Company,
$1.7 million of which has been previously recognized as
revenue, and the Company must simultaneously purchase, for
$2.0 million, the exclusive license. At this time,
management believes it is unlikely that the agreement will be
terminated as permitted by the amendment but cannot be certain of
 the ultimate outcome. If the agreement is not terminated, the
parties will remain obligated to perform in accordance with the
terms of the agreement, as amended.

F-14



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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 10  Income Taxes

The actual income tax expense for the years ended
December 31, 1999, 1998 and 1997, is different from the
amount computed by applying the statutory federal income tax
rates to losses before income tax expense. The reconciliation of
these differences is as follows:

|                                                     |  |                |        |      |  |      |         |   |  |   |        |  
|---------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                     |  | 1999           |        | 1998 |  | 1997
|                                                     |  |                |        |      |  |     
|                                                     |  |               
|                                                     |  | (in thousands)
|                                                    
|                                                    
|                                                    
|                                                    
|Tax benefit at federal statutory rate                |  | $              | (7,001 | )    |  | $    | (15,223 | ) |  | $ | (2,412 | )
|                                                    
|                                                    
|                                                    
|                                                    
|State income taxes, net of federal income tax effect |  |                | (949   | )    |  |      | (2,069  | ) |  |   | (326   | )
|                                                    
|                                                    
|                                                    
|                                                    
|Acquired in-process research and development         |  |                |       |      |  |      | 13,593  |   |  |   |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|Other                                                |  |                | 691    |      |  |      | 566     |   |  |   | 2      |  
|                                                    
|                                                    
|                                                    
|                                                    
|Net operating loss valuation adjustment              |  |                | (2,058 | )    |  |      |        |   |  |   |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|Increase in valuation allowance                      |  |                | 9,537  |      |  |      | 3,233   |   |  |   | 2,836  |  
|                                                     |  |                |        |      |  |      |         |   |  |   |        |  
|Income tax expense                                   |  | $              | 220    |      |  | $    | 100     |   |  | $ | 100    |  
|                                                     |  |                |        |      |  |      |         |   |  |   |        |  

The tax effect of cumulative temporary differences at
December 31, 1999, 1998 and 1997, follows:

|                          |                            |                              |        |         |     |      |        |         |     |  |       |        |     | 
|------------------------- | -------------------------- | ---------------------------- | ------ | ------- | --- | ---- | ------ | ------- | --- |  | ----- | ------ | --- | 
|                          |                            | 1999                         |        | 1998    |     | 1997
|                          |                            |                              |        |         |     |     
|                          |                            |                             
|                          |                            | (in thousands)              
|                         
|                         
|                         
|                         
|Deferred Tax Assets:      |                            |                              |        |         |     |      |        |         |     |  |       |       
|                         
|                         
|                         
|                         
|                          | Japanese withholding       |                              | $      |        |     |      | $      | 200     |     |  | $     | 100    |    
|                         
|                         
|                         
|                         
|                          | Tax carryforwards          |                              |        | 28,407  |     |      |        | 18,668  |     |  |       | 4,066  |    
|                         
|                         
|                         
|                         
|                          | Start-up costs             |                              |        | 129     |     |      |        | 221     |     |  |       | 312    |    
|                         
|                         
|                         
|                         
|                          | Accrued vacation           |                              |        | 160     |     |      |        | 117     |     |  |       | 39     |    
|                         
|                         
|                         
|                         
|                          | Other                      |                              |        | 909     |     |      |        | 830     |     |  |       |       |    
|                          |                            |                              |        |         |     |      |        |         |     |  |       |       
|                          |                            |                              | 29,605 |         |     |      | 20,036 |         |     |  | 4,517 |       
|                         
|                         
|                         
|                         
|                          | Less  Valuation allowance |                              |        | (29,148 | )   |      |        | (19,611 | )   |  |       | (4,313 | )  
|                          |                            |                              |        |         |     |      |        |         |     |  |       |       
|                          |                            | Net deferred tax assets      |        | $       | 457 |      |        | $       | 425 |  |       | $      | 204 | 
|                          |                            |                              |        |         |     |      |        |         |     |  |       |       
|Deferred Tax Liabilities: |                            |                              |        |         |     |      |        |         |     |  |       |       
|                         
|                         
|                         
|                         
|                          | Depreciation               |                              | $      | 247     |     |      | $      | 186     |     |  | $     | 118    |    
|                         
|                         
|                         
|                         
|                          | Prepaid expenses           |                              |        | 16      |     |      |        | 10      |     |  |       | 45     |    
|                         
|                         
|                         
|                         
|                          | Capital leases             |                              |        | 143     |     |      |        | 95      |     |  |       | 41     |    
|                         
|                         
|                         
|                         
|                          | Other                      |                              |        | 51      |     |      |        | 134     |     |  |       |       |    
|                          |                            |                              |        |         |     |      |        |         |     |  |       |       
|                          |                            | Net deferred tax liabilities |        | $       | 457 |      |        | $       | 425 |  |       | $      | 204 | 
|                          |                            |                              |        |         |     |      |        |         |     |  |       |       

At December 31, 1999, Net Operating Losses
(NOLs) carryforwards for income tax purposes are
approximately $71.3 million, including approximately
$30.0 million related to Oncormed prior to the Merger. The
Company also has research and development tax credit
carryforwards of approximately $888,000 as of December 31, 1999.
The carryforwards, if not utilized, will expire in increments
from 2008 through 2019. Utilization of the net operating losses
and credits may be subject to an annual limitation as provided by
 the Internal Revenue Code of 1986, and there can be no guarantee
 that such NOLs will ever be fully utilized. As a result of
cumulative losses, the Company has recorded a full valuation
allowance against its net deferred tax assets as management
believes it is more likely than not that the assets will not be
realizable.

F-15



---



##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 11  Long-Term Debt

Long-term debt at December 31, 1999 and 1998, consists of
the following:

|                       |                              |                      |        |       |       |  |        |       |       | 
|---------------------- | ---------------------------- | -------------------- | ------ | ----- | ----- |  | ------ | ----- | ----- | 
|                       |                              | 1999                 |        | 1998 
|                       |                              |                      |        |      
|                       |                              |                     
|                       |                              | (in thousands)      
|                      
|                      
|                      
|                      
|Equipment loans:       |                              |                      |        |       |       |  |        |      
|                      
|                      
|                      
|                      
|                       | Variable rate equipment loan |                      | $      | 3,383 |       |  | $      | 4,304 |      
|                      
|                      
|                      
|                      
|                       | 9.0% equipment loan          |                      |        | 405   |       |  |        | 679   |      
|                      
|                      
|                      
|                      
|                       | Other                        |                      |        | 409   |       |  |        | 98    |      
|                       |                              |                      |        |       |       |  |        |      
|                       |                              |                      | 4,197  |       |       |  | 5,081  |      
|                      
|                      
|                      
|                      
|Less  Current portion |                              |                      | (1,335 | )     |       |  | (1,292 | )    
|                       |                              |                      |        |       |       |  |        |      
|                       |                              | Total long-term debt |        | $     | 2,862 |  |        | $     | 3,789 | 
|                       |                              |                      |        |       |       |  |        |      

As of December 31, 1999, principal payments on long-term
debt are as follows (in thousands):

|                         |                     |   |       |       | 
|------------------------ | ------------------- | - | ----- | ----- | 
|Year ending December 31, |                     |   |       |      
|                        
|                        
|                        
|                        
|                         | 2000                |   | $     | 1,335 | 
|                        
|                        
|                        
|                        
|                         | 2001                |   |       | 1,232 | 
|                        
|                        
|                        
|                        
|                         | 2002                |   |       | 1,331 | 
|                        
|                        
|                        
|                        
|                         | 2003                |   |       | 40    | 
|                        
|                        
|                        
|                        
|                         | 2004                |   |       | 42    | 
|                        
|                        
|                        
|                        
|                         | 2005 and thereafter |   |       | 217   | 
|                         |                     |   |       |      
|                         |                     | $ | 4,197 |      
|                         |                     |   |       |      

In June 1999, the Company and the Maryland Economic
Development Corporation (MEDCO) entered into a Loan
Agreement (the MEDCO Loan) for the financing of the
Companys tenant improvements related to its office and
research laboratory or facility. The Company borrowed $425,000
under this agreement, bearing interest at 5.0% per annum. The
MEDCO Loan will be repaid in equal quarterly installments over
ten years beginning in September 1999; however, the unpaid
principal and interest may be due upon demand if the Company
relocates its corporate headquarters outside of Montgomery
County, Maryland. The Company granted MEDCO a security interest
collateralized by certain furniture.

In June 1998, the Company entered into a loan agreement for
the financing of laboratory, computer and office equipment. At
December 31, 1999, the Company has borrowed approximately
$4.8 million, bearing interest ranging from 7.6% to 8.8%.
The loan agreement will be repaid in 48 equal monthly
installments including a 15.0% balloon payment at the end of the
term. The Company granted the lender a security interest,
collateralized by all the equipment and fixtures acquired under
the loan.

In March 1997, the Company entered into a loan agreement for
 the purchase of laboratory and computer equipment. The Company
borrowed approximately $1.1 million under this agreement, bearing
 interest at 9.0%. The loan will be repaid in 48 equal monthly
installments. The Company has granted the lender a security
interest, collateralized by all of the equipment and fixtures
acquired under the loan. In conjunction with the agreement, the
Company granted warrants to the lender to purchase 30,051 shares
of the Companys Series B Convertible Preferred Stock
at an exercise price of $2.20 per share. Such warrants were
exercised in February 2000.

Interest expense was $415,000, $271,000 and $97,000 for the years
 ended December 31, 1999, 1998 and 1997, respectively.

F-16



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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 12  Stockholders Equity

During November 1997, the Company completed an initial
public offering (IPO) of 3,000,000 shares of common
stock at a price of $8 per share. In December 1997, the
underwriters exercised their over-allotment option on an
additional 347,000 shares. Net proceeds of the IPO (not including
 a concurrent Japan Tobacco Inc. (a collaboration customer)
investment of $3.0 million), after underwriting commissions
and expenses, were approximately $23.9 million. Concurrent
with the IPO, a note receivable of $50,000 plus interest from an
officer of the Company was forgiven, the vesting of certain
options was accelerated and the authorized capital stock of the
Company was increased to 60,000,000 shares of common stock and
10,000,000 shares of preferred stock.

In October 1996, an officer of the Company resigned. In
January 1997, in connection with the resignation, the 55,000
 shares of the Companys common stock held by the officer
were canceled in satisfaction of the $50,000 note receivable and
accrued interest obligation from the officer to the Company.

Four series of mandatory redeemable preferred stock have been
issued: Series A Convertible Preferred Stock
(Series A), Series A-1 Convertible
Preferred Stock (Series A-1), Series B
Convertible Preferred Stock (Series B) and
Series C Convertible Preferred Stock
(Series C).

During July 1997, the Company sold 4,444,443 shares of
Series C stock for net proceeds of approximately
$19.1 million. The Company also issued a warrant for an
additional 48,889 shares of Series C stock at an exercise
price of $4.50. At the time of issuance, the fair value of this
warrant, approximately $118,000, was recorded as Series C
stock on the Companys balance sheet. The fair value of this
 warrant was calculated using the Black-Scholes option pricing
model using the same assumptions used for options granted during
the period (see Note 15). This warrant was exercised by the
warrantholder concurrent with the Companys IPO.

All outstanding shares of preferred stock were converted to
common stock in conjunction with the Companys IPO on a
one-to-one basis.

Note 13  Commitments and Contingencies

Operating Lease

During 1997, the Company entered into an operating lease for a
new laboratory and corporate headquarters facility with a lease
term of ten years. In addition, the Company issued a warrant to
purchase 20,000 shares of common stock at an exercise price of
$5.40 per share in connection with the lease. The fair value of
the warrant, approximately $43,000, is being recorded as rent
expense over the term of the lease. The fair value of the warrant
 was calculated using the Black-Scholes option pricing model
using the same assumptions used for options granted during the
period (see Note 15). This warrant was exercised by the lessor
concurrent with the Companys IPO.

The Company has also entered into additional operating leases in
Gaithersburg, Maryland, Berkeley, California and Omaha, Nebraska
with varying terms expiring through 2004.

Certain leases obligate the Company to pay building operating
costs and also contain renewal provisions.

F-17



---



##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)



Note 13  Commitments and Contingencies 
(Continued)


Future minimum lease payments on these operating leases as of
December 31, 1999, are as follows (in thousands):

|                         |                     |   |        |       | 
|------------------------ | ------------------- | - | ------ | ----- | 
|Year ending December 31, |                     |   |        |      
|                        
|                        
|                        
|                        
|                         | 2000                |   | $      | 2,021 | 
|                        
|                        
|                        
|                        
|                         | 2001                |   |        | 1,743 | 
|                        
|                        
|                        
|                        
|                         | 2002                |   |        | 1,689 | 
|                        
|                        
|                        
|                        
|                         | 2003                |   |        | 1,733 | 
|                        
|                        
|                        
|                        
|                         | 2004                |   |        | 1,684 | 
|                        
|                        
|                        
|                        
|                         | 2005 and thereafter |   |        | 4,799 | 
|                         |                     |   |        |      
|                         |                     | $ | 13,669 |      
|                         |                     |   |        |      

Rent expense for the years ended December 31, 1999, 1998 and
 1997, was $1,813,000, $1,544,000 and $239,000, respectively.

Capital Leases

During 1999, the Company entered into a capital lease to purchase
 laboratory equipment for $300,000. Accumulated amortization for
this equipment was $8,000 at December 31, 1999. Payments
during the year ended December 31, 1999 totaled $10,000. The
 Company may terminate the lease during the first six months of
its term.

During 1996, the Company entered into a capital lease to purchase
 equipment for $471,000. Accumulated amortization for this
equipment was $386,000 and $269,000 at December 31, 1999 and
 1998, respectively. Payments during the years ended
December 31, 1999 and 1998, totaled $137,000 and $115,000,
respectively. In conjunction with this lease agreement, the
Company granted a warrant to the lessor to purchase 13,636 shares
 of the Companys Series B Convertible Preferred Stock
at an exercise price of $2.20 per share. Such warrant was
exercised in 1999 (see Note 12).

Future minimum lease payments for both capital leases as of
December 31, 1999, are as follows (in thousands):

|                                               |                                       |                              |     |     |     | 
|---------------------------------------------- | ------------------------------------- | ---------------------------- | --- | --- | --- | 
|Year ending December 31,                       |                                       |                              |     |    
|                                              
|                                              
|                                              
|                                              
|                                               |                                       | 2000                         |     | $   | 218 | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                       | 2001                         |     |     | 115 | 
|                                              
|                                              
|                                              
|                                              
|                                               |                                       | 2002                         |     |     | 106 | 
|                                               |                                       |                              |     |    
|                                               |                                       | Total minimum lease payments |     |     | 439 | 
|                                              
|                                              
|                                              
|                                              
|Less  Amounts representing imputed interest   |                                       |                              | 46  |    
|                                               |                                       |                              |     |    
|                                               | Present value of net minimum payments |                              |     | 393 |    
|                                              
|                                              
|                                              
|                                              
|Less  Current portion                         |                                       |                              | 192 |    
|                                               |                                       |                              |     |    
|Noncurrent portion of capital lease obligation |                                       | $                            | 201 |    
|                                               |                                       |                              |     |    

Contingencies

Clinical trials, manufacturing, marketing and sale of any of the
Companys collaborators potential therapeutic,
diagnostic or agricultural products may expose the Company to
liability claims from the use of such products. The Company
currently maintains product liability and medical malpractice
insurance.

F-18



---



##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 13  Commitments and Contingencies 
(Continued)

Litigation

On October 19, 1999, a lawsuit was filed in the Circuit
Court of Cook County, Illinois against Oncormed, Inc. and Gene
Logic Inc. alleging that Oncormed was negligent in
determining and reporting laboratory test results of a genetic
test conducted by Oncormed. Oncormed sold its testing business to
 a third-party company prior to the Companys acquisition of
 Oncormed. The Company is not engaged in any type of genetic
testing, nor are there plans to enter such markets. The Company
maintains insurance coverage against such claims, and management
does not believe this action will have a material adverse impact
on its business, financial condition or results of operations.

In December 1999, Incyte Pharmaceuticals, Inc.
(Incyte) filed an action against the Company in the
United States District Court for the Northern District of
California, Case No. C99-5180 MJJ. In the action, Incyte
asserts claims against the Company for infringement of certain
patent rights held by Incyte. The alleged infringement involves
the Companys use of a process that Affymetrix, Inc.
recommends be used in preparation of samples for use with the
Affymetrix GeneChip®. The Company has filed both a motion to
 transfer venue to the state of Maryland and an answer to the
complaint in which the Company denies such infringement. The
Company intends to defend its position vigorously. There can be
no guarantee that such defense will be successful and neither the
 outcome nor the range of any losses resulting from this action
can be made at this time. This action will continue to require
significant management time and expense for the foreseeable
future.

Note 14  401(k) Retirement Plan

During 1996, the Company established the Gene Logic Inc. 401(k)
Retirement Plan (the 401(k) Plan) for its employees
under Section 401(k) of the Internal Revenue Code. Under
this plan, all employees over 21 years of age and with at
least 90 days of service with the Company are eligible,
starting on the calendar quarter, to contribute from 2% to 15% of
 their salary. Employee contributions are 100% vested. The
Company is not required to make any contributions to the 401(k)
Plan and has not made any contributions through December 31,
 1999.

Note 15  Stock Based Compensation

During 1996, the Company instituted a stock plan (the Stock
 Plan), which was amended and restated in 1997, whereby the
 Companys Compensation Committee of the Board of Directors
(the Committee), at its discretion, can grant
options, award stock or provide opportunities to make direct
purchase of stock to employees, officers, directors and
consultants of the company and related corporations. The Stock
Plan is authorized to grant options of up to 7,100,000 shares of
common stock. At December 31, 1999, there were 1,805,047
shares reserved for issuance under the Stock Plan. During 1997,
the Company adopted a Directors Stock Plan (the
Directors Plan) to provide for granting of
options to non-employee directors of the Company. The
Directors Plan is administered by the Committee and is
authorized to grant options of up to 325,000 shares of common
stock. At December 31, 1999, there were 212,500 shares
reserved for issuance under the Directors Plan. Options are
 to be granted at the fair market value of the common stock at
the grant date. The options, awards and opportunities to purchase
 stock expire at the earlier of termination or the date specified
 by the Committee at the date of grant, but not more than ten
years. During 1997, the Company adopted an Employee Stock
Purchase Plan (the Purchase Plan) covering an
aggregate of 250,000 shares of common stock. The Purchase Plan
allows employees to purchase common stock of the Company, through
 payroll deductions of up to a maximum of 15% of their salary, at
 85% of the price of the shares at the time of purchase. At
December 31, 1999, there were 159,944 shares reserved for
issuance under the Purchase Plan.

F-19



---



##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)



Note 15  Stock Based Compensation 
(Continued)


The following is a rollforward of option activity for the years
ended December 31, 1999, 1998 and 1997:

|                             |                          |           |           |                     |   |          |           |           |   |   |      |      | 
|---------------------------- | ------------------------ | --------- | --------- | ------------------- | - | -------- | --------- | --------- | - | - | ---- | ---- | 
|                             |                          |           |           |                    
|                             |                          |           |           | Shares Subject to  
|                             |                          |           |           | Outstanding Options
|                             |                          |           |           |                    
|                             |                          |           |           |                     |   | Weighted
|                             |                          | Shares    |           |                     |   | Average 
|                             |                          | Available |           |                     |   | Exercise
|                             |                          | For Grant |           | Shares              |   | Price   
|                             |                          |           |           |                     |   |         
|Balance at December 31, 1996 |                          |           | 1,376,000 |                     |   |          | 424,000   |           |   | $ | 0.15 |     
|                            
|                            
|                            
|                            
|                             | Additional authorization |           |           | 4,225,000           |   |          |           |          |   |   |      |     | 
|                            
|                            
|                            
|                            
|                             | Options granted          |           |           | (2,281,881          | ) |          |           | 2,281,881 |   |   | $    | 1.31 | 
|                            
|                            
|                            
|                            
|                             | Options exercised        |           |           |                    |   |          |           | (152,943  | ) |   | $    | 0.15 | 
|                            
|                            
|                            
|                            
|                             | Options cancelled        |           |           | 55,578              |   |          |           | (55,578   | ) |   | $    | 0.15 | 
|                             |                          |           |           |                     |   |          |           |           |   |   |      |     
|Balance at December 31, 1997 |                          |           | 3,374,697 |                     |   |          | 2,497,360 |           |   | $ | 1.21 |     
|                            
|                            
|                            
|                            
|                             | Options granted          |           |           | (1,556,000          | ) |          |           | 1,556,000 |   |   | $    | 5.52 | 
|                            
|                            
|                            
|                            
|                             | Options exercised        |           |           |                    |   |          |           | (875,636  | ) |   | $    | 0.23 | 
|                            
|                            
|                            
|                            
|                             | Options cancelled        |           |           | 292,588             |   |          |           | (292,588  | ) |   | $    | 3.78 | 
|                             |                          |           |           |                     |   |          |           |           |   |   |      |     
|Balance at December 31, 1998 |                          |           | 2,111,285 |                     |   |          | 2,885,136 |           |   | $ | 3.57 |     
|                            
|                            
|                            
|                            
|                             | Additional authorization |           |           | 1,200,000           |   |          |           |          |   |   |      |     | 
|                            
|                            
|                            
|                            
|                             | Options granted          |           |           | (1,622,463          | ) |          |           | 1,622,463 |   |   | $    | 5.57 | 
|                            
|                            
|                            
|                            
|                             | Options exercised        |           |           |                    |   |          |           | (249,860  | ) |   | $    | 2.01 | 
|                            
|                            
|                            
|                            
|                             | Options cancelled        |           |           | 328,725             |   |          |           | (328,725  | ) |   | $    | 5.02 | 
|                             |                          |           |           |                     |   |          |           |           |   |   |      |     
|Balance at December 31, 1999 |                          |           | 2,017,547 |                     |   |          | 3,929,014 |           |   | $ | 4.41 |     
|                             |                          |           |           |                     |   |          |           |           |   |   |      |     

Options to purchase a total of 1,442,735, 722,345 and 859,315 at
December 31, 1999, 1998, and 1997, respectively, were
exercisable. The weighted-average grant-date fair value of
options granted during the years ended December 31, 1999,
1998 and 1997 were $3.50, $3.19 and $3.22, respectively.

During the year ended December 31, 1997, the Company granted
 options with exercise prices below fair value. The Company has
recorded deferred compensation of $6,897,000 at December 31,
 1997, and compensation expense of $1,498,000, $1,577,000 and
$619,000 for the years ended December 31, 1999, 1998 and
1997, respectively, related to option grants.

The following table provides further information on options
granted with exercise prices below fair value, compared to
options granted with exercise prices equal to fair value for the
year ended

F-20



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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 15  Stock Based Compensation 
(Continued)



|                                                                                         |  |        |           |          |  |             |      |               |  |   |      |  |  |   |      | 
|---------------------------------------------------------------------------------------- |  | ------ | --------- | -------- |  | ----------- | ---- | ------------- |  | - | ---- |  |  | - | ---- | 
|                                                                                         |  |        |           |          |  |             |      | Weighted     
|                                                                                         |  |        |           |          |  |             |      | Average      
|                                                                                         |  |        |           | Weighted |  | Weighted    |      | Fair Value of
|                                                                                         |  |        |           | Average  |  | Average     |      | Common       
|                                                                                         |  |        |           | Exercise |  | Option Fair |      | Stock on     
|                                                                                         |  | Shares |           | Price    |  | Value       |      | Grant Date   
|                                                                                         |  |        |           |          |  |             |      |              
|Options whose exercise price equals the fair value of the stock
	on the grant date       |  |        | 53,000    |          |  | $           | 5.27 |               |  | $ | 2.36 |  |  | $ | 5.27 | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Options whose exercise price is less than the fair value of the
	stock on the grant date |  |        | 2,228,881 |          |  |             | 1.22 |               |  |   | 3.24 |  |  |   | 4.31 | 

The following table summarizes information about stock options
outstanding at December 31, 1999:

|               |  |                     |           |                     |  |          |           |                |  |          |      |  |  |  |           |  |  |   |      | 
|-------------- |  | ------------------- | --------- | ------------------- |  | -------- | --------- | -------------- |  | -------- | ---- |  |  |  | --------- |  |  | - | ---- | 
|               |  |                     |           |                     |  |         
|               |  | Options Outstanding |           |                    
|               |  |                     |           | Options Exercisable
|               |  |                     |           | Weighted            |  |          |           |               
|               |  | Number              |           | Average             |  | Weighted |           | Number         |  | Weighted
|               |  | Outstanding at      |           | Remaining           |  | Average  |           | Exercisable at |  | Average 
|Range of       |  | December 31,        |           | Contractual         |  | Exercise |           | December 31,   |  | Exercise
|Exercise Price |  | 1999                |           | Life                |  | Price    |           | 1999           |  | Price   
|               |  |                     |           |                     |  |          |           |                |  |         
|$0.15$2.50    |  |                     | 1,126,656 |                     |  |          | 7.6 Years |                |  | $        | 1.56 |  |  |  | 703,096   |  |  | $ | 1.42 | 
|              
|              
|              
|              
|$2.51$4.99    |  |                     | 1,660,884 |                     |  |          | 9.1 Years |                |  | $        | 4.23 |  |  |  | 404,496   |  |  | $ | 4.17 | 
|              
|              
|              
|              
|$5.00$23.50   |  |                     | 1,141,474 |                     |  |          | 9.0 Years |                |  | $        | 7.47 |  |  |  | 335,143   |  |  | $ | 7.06 | 
|               |  |                     |           |                     |  |          |           |                |  |          |      |  |  |  |           |  |  |   |      | 
|$0.15$23.50   |  |                     | 3,929,014 |                     |  |          | 8.6 Years |                |  | $        | 4.41 |  |  |  | 1,442,735 |  |  | $ | 3.50 | 
|               |  |                     |           |                     |  |          |           |                |  |          |      |  |  |  |           |  |  |   |      | 

Had compensation cost for the Companys stock-based
compensation plans been determined based on the fair value at the
 grant dates for awards under the Stock Plan, consistent with the
 method of SFAS No. 123, the Companys net loss and
loss per common share would have been changed to the pro forma
amounts for the years ended December 31, 1999, 1998 and 1997
 as indicated below:

|                           |             |      |   |         |   |      |   |         |   |  |   |        |  
|-------------------------- | ----------- | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------ | -
|                           |             | 1999 |   | 1998    |   | 1997
|                           |             |      |   |         |   |     
|Net loss (in thousands):   |             |      |   |         |   |      |   |         |   |  |   |       
|                          
|                          
|                          
|                          
|                           | As reported |      | $ | (20,591 | ) |      | $ | (44,873 | ) |  | $ | (7,194 | )
|                          
|                          
|                          
|                          
|                           | Pro forma   |      |   | (22,852 | ) |      |   | (45,853 | ) |  |   | (7,243 | )
|                          
|                          
|                          
|                          
|Net loss per common share: |             |      |   |         |   |      |   |         |   |  |   |       
|                          
|                          
|                          
|                          
|                           | As reported |      | $ | (1.04   | ) |      | $ | (2.86   | ) |  | $ | (3.97  | )
|                          
|                          
|                          
|                          
|                           | Pro forma   |      |   | (1.15   | ) |      |   | (2.92   | ) |  |   | (3.99  | )

F-21



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##### Table of Contents



Gene Logic Inc.


Notes to Consolidated Financial Statements 
(Continued)

Note 15  Stock Based Compensation 
(Continued)

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model for the years
ended December 31, 1999, 1998 and 1997, with the following
assumptions:

|                        |  |                |  |                |  |               
|----------------------- |  | -------------- |  | -------------- |  | --------------
|                        |  | 1999           |  | 1998           |  | 1997          
|                        |  |                |  |                |  |               
|Expected volatility     |  | 98.0%          |  | 86.0%          |  | 60.0%         
|                       
|                       
|                       
|                       
|Risk-free interest rate |  | 4.57% to 6.97% |  | 4.18% to 5.61% |  | 5.72% to 5.86%
|                       
|                       
|                       
|                       
|Expected lives          |  | 13 years      |  | 13 years      |  | 13 years     
|                       
|                       
|                       
|                       
|Dividend rate           |  | 0%             |  | 0%             |  | 0%            

Note 16  Related Party Transactions

During 1999, the Company entered into a GeneExpress database
subscription with Therapeutic Genomics, Inc. A director of the
Company also serves as a director for TGI.

During 1999, the Company issued promissory notes to three
officers of the Company totaling $750,000 to offset tax
liabilities for unrealized capital gains resulting from stock
option exercises. In February 2000, two of the notes were
paid in full including accrued interest to date (see
Note 3).

Note 17  Segment Information

At December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, Disclosure
about Segments of an Enterprise and Related Information
(SFAS No. 131). SFAS No. 131 establishes
standards for reporting information about operating segments in
annual and interim financial statements and related disclosures
about its products, services, geographic areas and major
customers. The Companys operations are treated as one
operating segment.

The following is a breakdown of revenue by major collaborators
exceeding ten percent (10%) of such revenues and by geographic
areas:

|                    |                   |                     |  |                 |  |   |  |     |  |       |  |        |  |    |  |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|------------------- | ----------------- | ------------------- |  | --------------- |  | - |  | --- |  | ----- |  | ------ |  | -- |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- | 
|                    |                   |                     |  |                
|                    |                   | Major Collaborators |  | Geographic Area
|                    |                   |                     |  |                
|                    |                   | A                   |  | B               |  | C |  | D   |  | Japan |  | Europe |  | US
|                    |                   |                     |  |                 |  |   |  |     |  |       |  |        |  |   
|For the year ended: |                   |                     |  |                 |  |   |  |     |  |       |  |        |  |    |  |     |  |  |  |     |  |  |  |     |  |  |  |    
|                   
|                   
|                   
|                   
|                    | December 31, 1999 |                     |  | 43%             |  |   |  | 25% |  |       |  |       |  |    |  | 12% |  |  |  | 43% |  |  |  | 12% |  |  |  | 25% | 
|                   
|                   
|                   
|                   
|                    | December 31, 1998 |                     |  | 34%             |  |   |  | 23% |  |       |  | 24%    |  |    |  | 18% |  |  |  | 34% |  |  |  | 42% |  |  |  | 23% | 
|                   
|                   
|                   
|                   
|                    | December 31, 1997 |                     |  | 43%             |  |   |  | 57% |  |       |  |       |  |    |  |    |  |  |  | 42% |  |  |  |    |  |  |  | 57% | 

Note 18  Subsequent Event

On February 1, 2000, the Company completed a public offering
 of its common stock at $56.00 per share. The Company sold
4,680,000 shares, and net proceeds to the Company as a result of
the offering were approximately $247.5 million.

F-22



---



##### Table of Contents



Gene Logic Inc.

Schedule II  Valuation and Qualifying Accounts

Years Ended December 31, 1999, 1998 and 1997


Accrued Restructuring Charges:

|                  |  |            |     |               |  |              |   |         |  |             |       |             |  |   |        |   |  |   |      |   |  |   |     | 
|----------------- |  | ---------- | --- | ------------- |  | ------------ | - | ------- |  | ----------- | ----- | ----------- |  | - | ------ | - |  | - | ---- | - |  | - | --- | 
|                  |  |            |     |               |  | Amounts Due  |   | Amounts |  |             |       |            
|                  |  | Balance at |     | New           |  | to           |   | Charged |  | Adjustments |       |            
|                  |  | Beginning  |     | Restructuring |  | Acquisitions |   | Against |  | to Accrued  |       | Balance at 
|Description       |  | of Year    |     | Charges       |  | (1)          |   | Accrual |  | Amounts     |       | End of Year
|                  |  |            |     |               |  |              |   |         |  |             |       |            
|December 31, 1999 |  | $          | 184 |               |  | $            |  |         |  | $           |      |             |  | $ | (184   | ) |  | $ |     |   |  | $ |    | 
|                  |  |            |     |               |  |              |   |         |  |             |       |             |  |   |        |   |  |   |      |   |  |   |     | 
|December 31, 1998 |  | $          |    |               |  | $            |  |         |  | $           | 1,597 |             |  | $ | (1,163 | ) |  | $ | (250 | ) |  | $ | 184 | 
|                  |  |            |     |               |  |              |   |         |  |             |       |             |  |   |        |   |  |   |      |   |  |   |     | 





|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Restructuring liability recorded in connection with the merger
	with Oncormed, Inc. The liability has been included in the
	purchase price allocation performed in connection with the
	merger.