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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the Fiscal Year Ended December 31, 2001

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 0-27628

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SUPERGEN, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 91-1841574                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification Number)
|4140 Dublin Blvd., Suite 200, Dublin, CA                       |  | 94568                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrant's
telephone number, including area code:(925) 560-0100

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

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

Common Stock, $0.001 par value per share(Title of Class)

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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 ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the 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. o

The
aggregate market value of the voting stock held by non-affiliates of the Registrant (based on the closing sale price of the Common Stock as reported on the Nasdaq Stock
Market on March 15, 2002) was approximately $184,979,096. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of outstanding
shares of the Registrant's Common Stock as of the close of business on March 15, 2002 was 32,699,396.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12, and 13 of Part III incorporate information by reference from the definitive proxy statement for the Registrant's Annual Meeting of
Stockholders to be held on May 29, 2002.

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SUPERGEN, INC.        2001 ANNUAL REPORT ON FORM 10-K        TABLE OF CONTENTS

|           |          |     |                                                                                       | Page
|---------- | -------- | --- | ------------------------------------------------------------------------------------- | ----
|PART I     |          |     |                                                                                       |     
|           | Item 1.  |     | Business                                                                              |     
|           | Item 2.  |     | Properties                                                                            |     
|           | Item 3.  |     | Legal Proceedings                                                                     |     
|           | Item 4.  |     | Submission of Matters to a Vote of Security Holders                                   |     
|PART II    |          |     |                                                                                       |     
|           | Item 5.  |     | Market for Registrant's Common Equity and Related Stockholder Matters                 |     
|           | Item 6.  |     | Selected Financial Data                                                               |     
|           | Item 7.  |     | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|           | Item 7A. |     | Quantitative and Qualitative Disclosures About Market Risk                            |     
|           | Item 8.  |     | Financial Statements and Supplementary Data                                           |     
|           | Item 9.  |     | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |     
|PART III   |          |     |                                                                                       |     
|           | Item 10. |     | Directors and Executive Officers of the Registrant                                    |     
|           | Item 11. |     | Executive Compensation                                                                |     
|           | Item 12. |     | Security Ownership of Certain Beneficial Owners and Management                        |     
|           | Item 13. |     | Certain Relationships and Related Transactions                                        |     
|PART IV    |          |     |                                                                                       |     
|           | Item 14  |     | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |     
|SIGNATURES |          | S-1

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PART I

ITEM 1. BUSINESS

Our disclosure and analysis in this report contain forward-looking statements. Forward-looking statements provide our current expectations
or forecasts of future events. When we use the words "anticipate," "estimate," "project," "intend," "expect," "plan," "believe," "should," "likely" and similar expressions, we are making
forward-looking statements. In particular, these include statements relating to future actions, such as the future performance or results of current and anticipated clinical trials for Orathecin,
Nipent, decitabine, and our other products in development; the timing of filing of a new drug application for Orathecin; the anticipated launch of generic daunorubicin; the timing of and anticipated
approval of our generic paclitaxel; the timing and expectation of FDA approval of our new Nipent manufacturing facility; the sufficiency of our levels of Nipent inventory; the potential applications
for our compounds and products; and our estimates of potential market sizes. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the
public. Any or all of our forward-looking statements in this report and in any other public statements we make may turn out to be wrong. For example, our clinical data in all of our clinical trials
may not support filing of an NDA or the FDA may not approve our products; the analysis of our clinical trial data may be more complex than we anticipate causing delays; we may be unable to launch our
generic products as planned due to manufacturing or marketing difficulties; our manufacturing source for Nipent may not be approved by the FDA or the approval may be delayed; we may have inaccurately
estimated demand for Nipent and may not have sufficient inventory levels to satisfy demand; our products may not prove to be suitable for the additional indications that we currently believe based on
preliminary studies; and our estimates of market sizes may prove to be inaccurate. Inaccurate assumptions we might make and known or unknown risks and uncertainties can affect our forward-looking
statements. Consequently, no forward-looking statement can be guaranteed and our actual results may differ materially.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however,
to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Annual Reports on
Form 10-K. Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under the caption "Management's
Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting Future Operating Results" in this report. These are risks that we think could cause our actual
results to differ materially from expected and historical results. Other risks besides those listed in this report could also adversely affect us.

We
incorporated in March 1991 as a California corporation and changed our state of incorporation to Delaware in May 1997. Our executive offices are located at 4140 Dublin
Blvd., Suite 200, Dublin, CA, 94568 and our telephone number at that address is (925) 560-0100.

Overview

We are an emerging pharmaceutical company dedicated to the acquisition, rapid development, and commercialization of oncology therapies for solid tumors and
hematological malignancies. We seek to minimize the time, expense and technical risk associated with drug commercialization by identifying and acquiring pharmaceutical compounds in the later stages of
development, rather than committing significant resources to the research phase of drug discovery.

During
2001 we expended significant resources furthering our ongoing clinical trial and development activities and expanding our sales and marketing infrastructure and activities. Our
most significant activities surrounded our clinical efforts related to Orathecin, generically known as rubitecan, for treatment of pancreatic cancer and to a lesser extent furthering our
other clinical trial activities. During 2001, we completed enrollment in each of our three ongoing Phase III Orathecin

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pancreatic cancer trials. We are still in the process of compiling and analyzing data from each of the three clinical trials. Assuming favorable results from any one or a combination of our
Phase III studies, we anticipate filing a New Drug Application ("NDA"), with the United States Food and Drug Administration ("FDA"), in 2002. During 2001 we initiated a Phase III clinical
program with decitabine for treatment of myelodysplastic syndrome ("MDS"). During the year we also increased our revenues to $11.5 million, principally through increased sales of
Nipent® for treatment of hairy cell leukemia, which represented 87% of our revenues.

In
March 2002 we entered into a termination agreement with Abbott Laboratories ("Abbott') to terminate two 1999 agreements under which Abbott had undertaken to market and
distribute Orathecin and make investments in our common stock. We were to co-promote Orathecin with Abbott in the United States and Abbott had retained exclusive rights to market Orathecin
outside of the United States. In the U.S. market, we would have shared profits from product sales equally with Abbott. Outside the U.S. market, Abbott would have paid us royalties and transfer fees
based on product sales. As a result of the termination of these agreements, Abbott no longer holds any marketing, promotion, or royalty rights relating to Orathecin and is not required to pay us
milestone or other payments related to Orathecin. We continue to be responsible for pursuing and funding the clinical development of Orathecin and obtaining regulatory approval for the product in the
United States, Canada, member states of the European Union, and other countries.

As
a result of the termination, Abbott no longer holds a right to acquire up to 49% of our common stock, no longer has a right of first refusal to acquire us, nor are we obligated to
first offer rights
related to our product candidates to Abbott before discussing opportunities with other potential partners. Finally, Abbott is no longer obligated to purchase shares of our common stock upon the
satisfaction of Orathecin developmental and marketing milestones. Due to the termination of the agreements with Abbott, we now have the flexibility to pursue opportunities with Orathecin and other
compounds on our own or with a new strategic partner. We are currently evaluating our options as we work toward completion of the ongoing Orathecin trials and evaluate the trial results.

For
additional information about the possible risks to our business as a result of the termination of our relationship with Abbott, please see the section of this report entitled
"Management's Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting Future Operating Results."

Strategy

Our primary objective is to be a leading supplier of oncology therapies for solid tumors and hematological malignancies. Key elements of our strategy include:



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Summary of Products and Products in Development

The following table outlines our cancer products and cancer products in development, their indication or intended use, their therapeutic category, and their
regulatory status. (Non-oncological products are summarized in text below):

|Product Category                  |  | Compound                                                                                                                                        |  | Indication or Intended Use                                                                                                                                                                                         |  | Therapeutic
Category                                                  |  | Regulatory
Status                                                   
|--------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------- |  | --------------------------------------------------------------------
|Cytotoxic Agent/Immunosuppressant |  | Nipent                                                                                                                                          |  | Hairy cell leukemia
Chronic lymphocytic leukemia
Low grade non-Hodgkin's lymphoma
Cutaneous T-cell lymphoma/
    Peripheral T-cell lymphoma
Graft-versus-host disease
Transplantation Therapy
Autoimmune Disorders |  | Cancer
Cancer
Cancer
Cancer
Immunological
Immunological
Immunological |  | ApprovedPhase IV
Phase IV
Phase IV
Phase II/III
Phase I/II
Phase I  
|Cytotoxic Agent
(Oral)            |  | Orathecin
(Generic name rubitecan)                                                                                                              |  | Pancreatic cancer
Myelodysplastic syndromes/
    Acute myeloid leukemia/
    Chronic myeloid leukemia
Various other solid tumors                                                                                   |  | Cancer
Cancer
Cancer                                                  |  | Phase III
Phase II
Phase I/II                                       
|Hypomethylating Agent             |  | Decitabine                                                                                                                                      |  | Myelodysplastic syndromes
Acute myeloid leukemia/
    Chronic myeloid leukemia
Sickle cell anemia
Non-small cell lung cancer
Breast cancer                                                                         |  | Cancer
Cancer
Hematological
Cancer
Cancer                             |  | Phase III
Phase II
Phase II
Phase I/II Phase I/II                   
|Vaccine                           |  | Avicine                                                                                                                                        |  | Colorectal cancer
Pancreatic cancer                                                                                                                                                                                |  | Cancer
Cancer                                                         |  | Phase II/III
Phase II/III                                           
|Generic Anticancer Agents         |  | Mitomycin
Daunorubicin
Paclitaxel                                                                                                               |  | Solid tumors
Solid tumors
Solid tumors                                                                                                                                                                             |  | Cancer
Cancer
Cancer                                                  |  | Approved
ApprovedANDA filed                                         
|Radio-sensitizers                 |  | Lucanthone                                                                                                                                      |  | Brain tumors                                                                                                                                                                                                       |  | Cancer                                                                |  | Phase I                                                             
|Formulation Technologies          |  | Mito Extra
Partaject (formerly
    Spartaject) busulfan
Partaject Orathecin
Cremophor-free
    paclitaxel
Inhaled Orathecin
Inhaled paclitaxel |  | Solid tumors
Neoplastic meningitis/
    Bone marrow transplant
Solid tumors
Solid tumors
Solid tumors
Solid tumors                                                                                                 |  | Cancer
Cancer
Cancer
Cancer
Cancer
Cancer                             |  | NDA filed
Phase I/II
Pre-clinical
Pre-clinical
Phase II
Pre-clinical
|Prodrugs                          |  | CZ 112                                                                                                                                          |  | Solid tumors                                                                                                                                                                                                       |  | Cancer                                                                |  | Phase I                                                             
|Anti-angiogenesis                 |  | VEGF                                                                                                                                            |  | Solid tumors                                                                                                                                                                                                       |  | Cancer                                                                |  | Pre-clinical                                                        

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Oncology Products and Products in Development

1.Nipent

Nipent,
generically known as pentostatin or deoxycoformycin, inhibits a key enzyme in the DNA synthesis process and results in cytotoxicity, primarily in lymphocytes. The specific
mechanism differs from other chemotherapy agents. Nipent's most unique feature is its selectivity for lymphocytes, with little effect on bone marrow or normal tissues, which creates an interest in
this product for the treatment of cancers of the lymphoid system and other hematologic malignancies. Nipent has been our principal source of revenue during 2001, 2000 and 1999, representing 87%, 82%
and 91% of our revenues in each of those years, respectively.

Hairy Cell Leukemia

We acquired Nipent from the Parke-Davis division of the Warner-Lambert Company (now Pfizer) in 1996, and we are selling this drug in the United States for the
treatment of hairy cell leukemia, a type of B-lymphocytic leukemia. Warner-Lambert retained a worldwide, royalty-free license to sell Nipent but has agreed not to sell Nipent
in North America through September 2006. In 1997, Warner-Lambert further agreed to buy Nipent from us for all of its sales outside the United States through at least October 2004. We are
permitted to sell Nipent outside of North America for diseases other than cancer until September 2006, at which time we may sell the drug worldwide for any disease.

Other Indications

We believe that Nipent has a unique mechanism of action and Phase IV trials indicate that it may have activity in a variety of other hematologic cancers.
In oncology, we are pursuing treatments for lymphatic malignancies and disorders, such as chronic lymphocytic leukemia, low-grade non-Hodgkin's lymphoma, cutaneous
T-cell lymphoma, and peripheral T-cell lymphoma. Nipent has received orphan drug designation by the FDA for use against chronic lymphocytic leukemia and cutaneous
T-cell lymphoma. We are pursuing trials that will lead to peer reviewed articles indicating efficacy of Nipent in various leukemias.

In
addition, Nipent has shown activity in various autoimmune diseases, including graft-versus-host disease that is not responsive to standard therapies, bone marrow
transplantation, rheumatoid arthritis, and multiple sclerosis. We estimate the United States markets for both graft-versus-host disease and rheumatoid arthritis are larger than the market
for Nipent's current applications. We are conducting Phase I clinical trials in both of these indications and have targeted graft-versus-host disease for a registration seeking
Phase II/III program currently in progress. We are also developing an oral formulation of Nipent, suitable for rheumatoid arthritis and other chronic immune disorders.

2.Orathecin

Orathecin,
generic name rubitecan, formerly known as RFS2000 or 9-NC, is an oral chemotherapy compound in the camptothecin class, which we licensed from the Stehlin
Foundation for Cancer Research in 1997. Orathecin is a second-generation topoisomerase I inhibitor that causes single-strand breaks in the DNA of rapidly dividing tumor cells. We believe that
Orathecin may have significant advantages over many existing anticancer drugs, including efficacy, a superior side effect profile, and oral dosing. In particular, we believe that the compound causes
significantly less inhibition of bone marrow function, due in part to its dosing schedule, which provides for a cycle of five days of administration followed by two days of recovery. In clinical
trials, the observed side effects are mild to moderate hematological toxicities, low-grade cystitis, infrequent and mild hair loss and gastrointestinal disorders. Finally, as an oral drug
that can be taken at home, Orathecin may provide patients with
additional convenience and improved quality of life, and may reduce overall healthcare costs. We believe that Orathecin is a franchise drug for leadership in the treatment of a broad array of solid

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tumors and hematological malignancies. We are seeking rapid development of Orathecin and anticipate priority review by the FDA of the drug for pancreatic cancer, for which there are limited treatment
options. In addition to patent protection, we have orphan drug designation for this disease, which may provide us with seven years of marketing exclusivity in the United States after FDA approval.

Pancreatic Cancer

Pancreatic cancer is associated with high patient mortality, causing more than 75,000 deaths annually in the United States and Europe. It is the fourth leading
cause of death by cancer in the United States with an average survival time of four to five months following diagnosis. The current therapeutic treatment options most commonly used to treat pancreatic
cancer include 5-fluorouracil ("5-FU") and Gemzar.

In
May 2000, we presented data from a Phase II study of Orathecin at a meeting of the American Society of Clinical Oncology ("ASCO"). These data demonstrated Orathecin's
efficacy in pancreatic cancer patients who had failed previous chemotherapy. Of the 45 patients with measurable disease, twenty two percent either experienced a reduction in the size of their tumor or
disease stabilization, meaning that the tumor did not continue to grow. After starting Orathecin treatment, median survival for these ten patients was approximately ten months, while forty percent of
these patients survived more than twelve months and twenty percent survived more than twenty four months.

In
1998 we commenced three separate stand-alone pivotal Phase III clinical trials with Orathecin for treatment of pancreatic cancer. The trials are randomized, unblinded studies
being conducted in approximately 200 centers. The primary endpoint of these trials is survival. The three studies are outlined as follows:

|Protocol Description                                                           |  | Enrollment
Completed |  | Patients
Enrolled
|------------------------------------------------------------------------------ |  | -------------------- |  | -----------------
|Orathecin or 5-FU in patients who have failed Gemzar                           |  | February 2001        |  | 448              
|Orathecin or other therapies in patients who have failed other prior therapies |  | June 2001            |  | 409              
|Orathecin or Gemzar in patients who have not undergone chemotherapy            |  | October 2001         |  | 994              

We
are still in the process of compiling and analyzing data from each of the three clinical trials. Assuming favorable results from any one, two, or combination of all three of these
trials, we anticipate filing an NDA with the FDA in 2002. The trial design for each of the three studies allows patients who initially were being treated with Gemzar or other therapies to "cross
over," or elect to be treated with Orathecin. At the time the trials were designed, based on results of cancer studies conducted by others, we believed that the percentage of patients that would cross
over for treatment with Orathecin would be in the range of 10% to 20% of the enrolled patients. Based on a preliminary review of the clinical trial information, we believe that the number of patients
in the first two studies that have actually crossed over to Orathecin has exceeded the number anticipated. This could affect the timing and statistical analysis of the studies. In early
April 2002, we will be convening a panel of experts to discuss strategies for filing an NDA for Orathecin.

Myelodysplastic Syndromes

Myelodysplastic syndromes are a group of conditions that have in common abnormalities in the blood-producing cells of the bone marrow. The conditions are fatal,
although patients can live for several years after diagnosis. Treatment of patients with MDS has generally proven disappointing. The current standard of care is management by supportive measures, such
as blood transfusion, or the administration of antibiotics to fight infections. Hematopoietic growth factors also have been used to treat MDS.

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We
are conducting a Phase II Orathecin study at the M.D. Anderson Cancer Center enrolling patients with a diagnosis of MDS, as well as related conditions such as chronic myeloid
leukemia and acute myeloid leukemia. Based on preliminary positive results from this study, we have initiated a confirmatory Phase II multi-center study as part of our registration seeking
strategy.

Other Potential Indications

Studies have shown Orathecin to be active in more than 30 human and animal tumor models in indications such as breast, lung, colorectal, ovarian, gastric, and
prostate cancers as well as sarcomas. We are aggressively pursuing more than 35 additional Phase I/II trials using Orathecin both as a single therapeutic agent and in combination with other
anticancer agents in solid tumors and hematological malignancies. We intend to make available to physicians copies of peer-reviewed medical journal articles and other validated scientific
information related to these trials. We believe this will provide physicians with more up-to-date product information and will better enable them to meet their patients'
medical needs.

In
addition, we are currently conducting pilot studies using Orathecin in combination with other chemotherapeutic agents. In studies to date, Orathecin has not exhibited the cardiac,
pulmonary, hepatic or renal toxicities that limit the acute and/or chronic dosages of several chemotherapeutics. In addition, some early studies suggest Orathecin could be used to treat cancer on a
chronic rather than acute basis.

3.Decitabine

Decitabine
is a potent hypomethylating agent that we acquired from Pharmachemie B.V., a subsidiary of Teva Pharmaceuticals, in September 1999. Decitabine is a pyrimidine analog
that has a mechanism of action which is different from other chemically related compounds, such as gemcitabine and cytosine arabinoside. Decitabine's mechanism is related to DNA hypomethylation.
Methylation of DNA is a major mechanism regulating gene expression. Researchers have determined that an increase in methylation of DNA results in blocking the activity of several genes that regulate
cell division and differentiation, known as "suppressor genes." With suppressor genes blocked, cell division becomes unregulated, causing cancer. In studies researchers have demonstrated that
decitabine reduces the methylation of DNA, leading to reexpression of suppressor genes and a resulting redifferentiation and maturation of the cancer cells back to normal. Researchers have also shown
that decitabine treatment restores sensitivity of tumors to treatment by drugs such as cisplatin by reversing drug resistance.

Myelodysplastic Syndromes

In multiple Phase II studies in Europe, researchers have shown decitabine to be effective for treating MDS. Based on positive results from these studies,
we have initiated two randomized Phase III studies
at sixty leading hospitals in the United States and Europe with 160 and 220 patients, respectively, comparing decitabine to best supportive care for MDS. The principal endpoints are time to acute
myeloid leukemia or death in the United States study, and survival time in the European study. These Phase III trials, if successful, are designed to secure approval for this indication.
Decitabine has received orphan drug designation from the FDA for MDS, which designation may provide us with seven years of marketing exclusivity in the United States after FDA approval.

Other Indications

In addition to MDS, Phase I/II studies have shown that decitabine is effective in a variety of other hematological malignancies such as acute myeloid
leukemia and chronic myeloid leukemia. Preliminary results also suggest activity in solid tumors such as non-small cell lung cancer. Phase II clinical trials with decitabine are
ongoing for this indication. Phase I results also suggest that decitabine may be

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applicable for treatment of non-malignant diseases such as sickle cell anemia. A Phase II clinical program has been initiated for treatment of sickle cell anemia using decitabine.

4.Avicine

In
July 2000, we acquired the sales and marketing rights in the United States to Avicine from AVI BioPharma, Inc. ("AVI"). Avicine is a therapeutic cancer vaccine in
late-stage clinical development, and has completed five clinical studies in more than 200 patients.

Colorectal Cancer

Results from a Phase II human study using Avicine as a treatment for advanced colorectal cancer showed that patients who responded to the peptides in the
vaccine, in the words of the study author, "exhibited significant survival benefits" compared to patients treated with chemotherapy alone. With the assistance of leading oncologists and the FDA, AVI
has developed a Phase III protocol for Avicine as a first-line treatment for metastatic colorectal cancer.

Pancreatic Cancer

A Phase II study has been completed using Avicine in the treatment of pancreatic cancer and has demonstrated promising results. A Phase III clinical
program is currently being prepared.

5.Generic Anticancer Drugs

We
have pursued development of generic versions of existing anticancer agents as part of our Extra product development efforts. We believe that the total estimated United States sales
for generic anticancer products have decreased over the last few years due to increased competition. We also believe sales for these generics may continue to decrease as a result of competitive
factors. These factors may include reductions in the per unit sales price, the introduction of additional generics as well as other cancer drugs, new formulations for these drugs and the use of
different therapies. Therefore, we currently intend to limit our development of generic products to those that we feel either require minimal effort to submit an Abbreviated New Drug Application
("ANDA") and obtain marketing clearance, or that offer significant market opportunities.

Mitomycin

We have received ANDA approval for our generic mitomycin, which we are selling in the United States.

Daunorubicin

We received approval of an ANDA for generic daunorubicin from the FDA in November 2001. We expect to launch this product in early 2002.

Paclitaxel

We filed an ANDA for generic paclitaxel with the FDA in August 1998 and have filed a number of responses to letters from the FDA concerning our
application. We anticipate an approval in 2002.

6.Lucanthone

Lucanthone
is a topoisomerase II inhibitor that we licensed in May 2000 from Dr. Robert Bases of the Albert Einstein College of Medicine. Researchers are currently
evaluating lucanthone as a radio-sensitizer in a Phase I study of patients with brain tumors.

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Formulation Technology, Prodrugs, and Other Products

We are focused on the application of our technologies to the development of improved formulations of existing anticancer agents, which will be marketed as brand
name pharmaceuticals. We believe that incorporating our technologies with these compounds will result in products with improved delivery and/or administration. The development of these products is
subject to the NDA approval process.

1.Extra Technology

We
have developed several applications for our proprietary Extra technology. We believe this technology significantly improves the safety profile and handling characteristics of several
anticancer drugs currently on the market. In March 1994, we acquired exclusive worldwide rights to the patented cyclodextrin technology used in our Extra technology from Janssen Biotech, N.V.
and others.

Many
generic anticancer drugs are available only in a powder form that must be mixed into a solution before injection into a vein. If successful, our Extra technology will produce a
ready-to-inject, stable solution that will ease administration and save time by eliminating the potentially dangerous mixing procedure. It could also provide safety benefits
for those administering the dose by reducing their risk of exposure to the drug. Moreover, we believe that our ready-to-inject stable solutions may have a significantly longer
shelf life at room temperature than the mixed solutions. In addition, many existing anticancer pharmaceuticals, including those under development by us, are potent toxins that can cause serious
irreversible damage to a patient's muscle or skin should the drug accidentally leak during injection. We believe that our Extra technology may increase the safety of these existing anticancer drugs by
shielding the tissue from the drug at the injection site. The drug is released upon circulation within the bloodstream. We believe that each of these features will result in our Extra products having
a significant competitive advantage over their counterparts currently on the market.

Extra products under development

We filed an NDA for Mito Extra, our Extra formulation of mitomycin, in December 1997, which was accepted by the FDA in February 1998. In
March 2002, we responded to an FDA request for additional formulation, manufacturing and clinical information. This response included a report from a recently
completed multi-center study of 116 patients with advanced cancers treated with Mito Extra. In addition, we are evaluating our Extra technology for additional applications of other generic anticancer
agents as well as Nipent.

2.Partaject Drug Delivery Technology

Partaject
drug delivery technology is a drug delivery system that accommodates poorly water-soluble and water-insoluble compounds by encapsulating them with a fatty layer, known as a
phospholipid. The Partaject technology involves coating particles of a drug that are of submicron or near micron size with a membrane-forming phospholipid layer, thereby permitting the creation of a
suspension of the drug rather than a solution, and its intravenous injection without the use of potentially toxic solubilizing agents. As a result, the Partaject technology may reduce toxicity created
by other injectable forms of delivery and potentially increase efficacy by facilitating delivery of compounds whose prior intravenous delivery was impractical because of solubility-related formulation
difficulties.

Partaject products under development

Busulfan is currently marketed in an oral dosage form by Glaxo Wellcome Inc. It is frequently used "off-label" as a bone marrow ablating agent
prior to bone marrow transplants. In 1998, we completed a Phase I clinical trial of Partaject busulfan at both Johns Hopkins Oncology Center and

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Duke University Medical Center. A Phase I clinical trial in pediatric bone marrow ablation has been completed in 35 patients at St. Jude's Children's Hospital in Memphis.

Partaject
busulfan is currently also being developed for intrathecal treatment of neoplastic meningitis with a Phase I/II study at Duke University Medical Center and a
Phase I study is being completed by the Pediatric Brain Tumor Consortium.

We
are also developing Partaject Orathecin, an intravenous formulation, which is suitable for patients who cannot swallow an oral medication. This is currently in
pre-clinical development.

3.Cremophor-Free Paclitaxel

In
January and October 2000 we were issued two United States patents for a Cremophor-free formulation of paclitaxel. We were issued a third patent for an oral
formulation in November 2001. We believe that these patents have important clinical and strategic implications as such a formulation
obviates the need of pre-medication, which is currently required with the use of paclitaxel. We believe that the lack of pre-medication and an oral formulation will prove to be
major competitive advantages in the paclitaxel market, which industry reports estimated to be $1.6 billion in 2000.

4.Inhaled Cancer Drugs

In
December 1999, we entered into license and research agreements with the Clayton Foundation for Research and its technology transfer organization, Research Development
Foundation. Under the terms of the agreements, we acquired worldwide rights to inhaled versions of formulations of paclitaxel and camptothecins, including Orathecin. Phase I clinical studies
with inhaled Orathecin for the treatment of lung cancer and pulmonary metastatic disease have been completed at the M.D. Anderson Cancer Center and the Baylor College of Medicine and a Phase II
study is under way.

5.Oral Prodrug Delivery TechnologyCZ 112

Oral
prodrug delivery technology involves administering an inactive compound, known as a prodrug, which is absorbed in the digestive tract and is converted to an active agent in the
liver by an enzyme located there. Oral prodrug delivery technology could potentially enable the oral delivery of drugs that are otherwise only used in an intravenous formulation. The resulting active
compounds may pass through the systemic circulation and act at peripheral sites. We are applying the oral prodrug delivery technology to compounds selected for their potential either to serve as oral
delivery agents for systemically active chemotherapeutic or radio sensitizing drugs previously available only in intravenous form.

CZ
112 is an oral prodrug for Orathecin we licensed from the Stehlin Foundation in November 1999 after initial Phase I testing. We are currently completing additional
pre-clinical tumor model studies prior to deciding to undertake further clinical development.

6.Surface Safe®

In
July 1999, we acquired the Surface Safe product line from Aldorr, Inc., a medical technology development company. Surface Safe is a two-step towelette
disposable cleaning system used to decontaminate any work surface where chemotherapeutic preparation is conducted. The first towelette contains chemicals recommended by the Centers for Disease Control
and the Occupational Safety Health Administration to clean work surfaces. The second towelette is used to deactivate the chemicals used in the first towelette, in order to prevent damage to work
surfaces through its potent oxidizing process. We launched Surface Safe in the United States in March 2001 and intend to launch the product in other countries in the near future.

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Strategic and Collaborative Relationships

We identify and license or buy rights to products or compounds that are typically in human clinical development. We then seek to enhance and complete the product
development and bring the product to market internally or through collaborations with others. We have entered into a variety of strategic relationships and licensing agreements in pursuing our
business. Some of our more significant relationships are as follows:

1.Orathecin

Stehlin Foundation for Cancer Research

In September 1997, we licensed the exclusive worldwide royalty-bearing rights to Orathecin from the Stehlin Foundation for Cancer Research, a Houston,
Texas-based cancer research clinic. The Stehlin Foundation was established in 1969 by Dr. John S. Stehlin, Jr. M.D., a surgical oncologist, for the express purpose of conducting basic
research that can be applied directly to improving the treatment of patients with cancer. All research is clinically oriented and conducted at the Stehlin Foundation's facility in Houston, Texas. In
November 1999, we amended our agreement with the Stehlin Foundation to broaden the definition of licensed compounds to include certain analogues of Orathecin. Under these agreements, we are
required to seek commercial applications for Orathecin. We are required to pay the Stehlin Foundation approximately $10 million for research and must make cash royalty payments and cash or
stock milestone payments to the Stehlin Foundation as we develop and commercialize Orathecin.

Abbott Laboratories

In December 1999, we entered into two agreements with Abbott Laboratories, a Common Stock and Option Purchase Agreement and a Worldwide Sales, Distribution
and Development Agreement relating to Orathecin. Under these agreements, Abbott was to invest in shares of our common stock and would participate with us in the marketing and distribution of
Orathecin. We would have co-promoted Orathecin with Abbott in the United States and Abbott had exclusive rights to market Orathecin outside of the United States. In the United States
market, we would have shared profits from product sales equally with Abbott, while outside of the United States market, Abbott would have paid us royalties and transfers fees based on product sales.
Abbott was obligated to purchase up to $81.5 million in shares of our common stock over a period of time. In addition, Abbott had an option to purchase
up to 49% of the shares of our common stock outstanding at the time of exercise at $85 per share. Abbott also had a right of first discussion with respect to our product portfolio and a right of first
refusal to acquire us. In connection with these agreements, Abbott made a $26.5 million equity investment in January 2000 and a $2.5 million equity milestone payment in
July 2001.

On
March 4, 2002, SuperGen and Abbott mutually terminated the Common Stock and Option Purchase Agreement and the Worldwide Sales, Distribution and Development Agreement. We
regained all marketing rights to Orathecin worldwide and are no longer obligated to share profits from product sales of Orathecin. Abbott no longer has the right or obligation to purchase the
remaining aggregate amount equal to $52.5 million in shares of our common stock, no longer has the option to purchase up to 49% of our outstanding shares, no longer has the right of first
discussion with respect to our product portfolio, and no longer has a right of first refusal to acquire us. Accordingly, we will not receive any further milestone payments from Abbott. In connection
with termination we also agreed to reimburse Abbott for $1.6 million in development fees.

In
December 1999, we entered into a Nipent distribution agreement with Abbott, which is still in effect. Beginning March 1, 2000, Abbott became the exclusive United States
distributor of Nipent for a period of five years. We retain United States marketing rights for Nipent. Under this agreement, in January 2000, Abbott made a $5 million cash payment to us
in connection with the granting of the

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exclusive distribution rights. This amount is being recognized in revenue ratably over the term of the distribution agreement.

2.AVI BioPharma, Inc.Avicine

In
July 2000, we finalized an agreement with AVI BioPharma, Inc. to obtain the United States marketing rights for Avicine, AVI's proprietary cancer vaccine currently in
late-stage clinical testing against a variety of solid tumors. Avicine is a non-toxic immunotherapy that neutralizes the effect of a tumor-associated antigen on cancer cells,
while stimulating the body's immune system to react against the foreign tumor. Avicine has completed five clinical studies in more than 200 patients.

Under
the terms of the agreement, we will be responsible for United States marketing and sales of Avicine, and AVI will be responsible for product manufacturing. In addition, we obtained
the right of first discussion with respect to all of AVI's oncology compounds. Both companies will share clinical development and regulatory costs for the FDA approval process, and profits will be
split equally. SuperGen and AVI will jointly determine the optimum development strategy for the international marketplace and will share all profits received.

We
made equity investments totaling $22 million in AVI in the form of cash and SuperGen common stock. As part of the agreement, we have an option to acquire an additional 10% of
AVI's common
stock. This option is exercisable for a three-year period commencing on the earlier of the date the FDA accepts the NDA submitted for Avicine, or the date on which the closing price of
AVI's common stock exceeds the option exercise price. Neither event has occurred as of December 31, 2001.

3.Peregrine PharmaceuticalsVEGF (Anti-Angiogenesis)

In
February 2001, we completed a transaction to license a platform drug-targeting technology known as Vascular Targeting Agent ("VTA") from Peregrine Pharmaceuticals,
formerly known as Techniclone Corp. The licensed technology is specially related to Vascular Endothelial Growth Factor ("VEGF"). Terms of the agreement include an up-front equity
investment in Peregrine of $600,000 and subsequent milestone payments, that ultimately could total $8 million. In addition, we will pay royalties to Peregrine based on the net revenues of any
drugs commercialized using the VEGF technology.

The
VTA technology is a proprietary platform designed to specifically target a tumor's blood supply and subsequently destroy the tumor with various attached therapeutic agents.

Dr. Phillip
Thorpe, Professor of Pharmacology at the University of Texas, Southwestern Medical Center, and the inventor of the VTA technology, has demonstrated proof of principle
with this technology in several animal models. The results of Dr. Thorpe's studies have been published in several peer-reviewed scientific journals. The next step in the development
process is filing an investigational new drug application ("IND") based on Dr. Thorpe's study data.

4.Non-Oncology Proprietary Products

We
are currently seeking strategic alliances and licensing agreements for further development of certain non-oncology products, including RF 1010, RF 1051,
pyrazinoylguanidine ("PZG"), and AM 454.

RF
1010 is an analog of a naturally occurring human non-androgenic hormone. We have conducted Phase II trials using RF 1010 to treat various forms of anemia and
neutropenia. These diseases destroy red and white blood cells and thereby weaken the immune system, leaving patients susceptible to infections that could result in serious illness or death.

RF
1051, which is a naturally occurring substance in humans, has applications for treatment of diabetes and obesity. Our Phase II trials have indicated that this proprietary oral
drug may cause the

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body to store less fat or use more fat to produce energy. We have received orphan drug designation for RF 1051 in the treatment of Prader-Willi Syndrome, a type of genetic obesity.

PZG
is a product for treatment of Type II, or adult-onset, diabetes. Animal studies and early clinical studies of PZG suggest that it may help to control the blood sugar and lipid
abnormalities of diabetes, and may have utility in treating a lipid disorder unrelated to diabetes called hypertriglyceridemia, obesity, hypertension and the uremia of renal failure. We recently
initiated a small, well-defined and controlled Phase II study to characterize the hypoglycemic and lipid-lowering effects of PZG in Type II diabetes.

In
2000 we acquired the intellectual property of AMUR Pharmaceuticals, Inc. ("Amur"), a company with the proprietary rights to AM 454, which can potentially prevent the onset of
Type II diabetes according to pre-clinical animal studies, and rights to a 20K growth hormone, with potential for treatment of Type II diabetes. Amur's technology is based on
a new water-soluble class of hormones.

Research and Development Costs

Because of the stage of our development and the nature of our business we expend significant resources on research and development activities. We expended
$47.8 million, $31.4 million, and $17.3 in 2001, 2000 and 1999, respectively, on research and development.

New Drug Development and Approval Process

Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of pharmaceuticals and in
our ongoing research and development activities. All of our products will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are
subject to rigorous pre-clinical testing and clinical trials and other pre-marketing approval requirements by the FDA and regulatory authorities in other countries. In the
United States, various federal, and in some cases state statutes and regulations also govern or impact upon the manufacturing, safety, labeling, storage, record-keeping and marketing of such products.
The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations, require the expenditure of substantial resources. Regulatory
approval, when and if obtained, may be limited in scope which may significantly limit the indicated uses for which a product may be marketed. Further, approved drugs, as well as their manufacturers,
are subject to ongoing review and discovery of previously unknown problems with such products, which may result in restrictions on their manufacture, sale or use or in their withdrawal from the
market.

The
process for new drug approval has many steps, including:

Drug discovery.In the initial stages of drug discovery before a compound reaches the laboratory, tens of thousands of
potential compounds are randomly screened for activity against an assay assumed to be predictive for particular disease targets. This drug discovery process can take several years. Once a company
locates a "screening lead", or starting point for drug development, isolation and structural determination may begin. The development process results in numerous chemical modifications to the
screening lead in an attempt to improve the drug properties of the lead. After a compound emerges from this process, the next steps are to conduct further preliminary studies on the mechanism of
action, further in vitro, or test tube, screening against particular disease targets and finally, some in vivo, or animal, screening. If the compound passes these barriers, the toxic effects of the
compound are analyzed by performing preliminary exploratory animal toxicology. If the results demonstrate acceptable levels of toxicity, the compound emerges from the basic research mode and moves
into the pre-clinical phase.

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Pre-clinical testing.During the pre-clinical testing stage, laboratory and animal studies are
conducted to show biological activity of the compound against the targeted disease, and the compound is evaluated for safety. These tests typically take approximately three and one-half
years to complete, and must be conducted in compliance with Good Laboratory Practice ("GLP"), regulations.

Investigational new drug application.During the pre-clinical testing, an IND is filed with the FDA to begin
human testing of the drug. The IND becomes effective if not rejected by the FDA within 30 days. The IND must indicate the results of previous experiments, how, where and by whom the new studies
will be conducted, the chemical structure of the compound, the method by which it is believed to work in the human body, any toxic effects of the compound found in the animal studies and how the
compound is manufactured. All clinical trials must be conducted in accordance with Good Clinical Practice ("GCP") regulations. In addition, an Institutional Review Board ("IRB"), comprised of
physicians at the hospital or clinic where the proposed studies will be conducted, must review and approve the IND. The IRB also continues to monitor the study. Progress reports detailing the results
of the clinical trials must be submitted at least annually to the FDA. In addition, the FDA may, at any time during the 30-day period or at any time thereafter, impose a clinical hold on
proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. In
some instances, the IND application process can result in substantial delay and expense.

Some
limited human clinical testing may be done under a Physician's IND in support of an IND application and prior to receiving an IND. A Physician's IND is an IND application that
allows a single individual to conduct a clinical trial. A Physician's IND does not replace the more formal IND process, but can provide a preliminary indication as to whether further clinical trials
are warranted, and can, on occasion, facilitate the more formal IND process.

Clinical
trials are typically conducted in three sequential phases, but the phases may overlap.

Phase I clinical trials.After an IND becomes effective, Phase I human clinical trials can begin. These tests,
involving usually between 20 and 80 healthy volunteers or patients, typically take approximately one year to complete. The tests study a drug's safety profile, and may include the safe dosage range.
The Phase I clinical studies also determine how a drug is absorbed, distributed, metabolized and excreted by the body, and the duration of its action. Phase I/II trials are normally
conducted for anticancer product candidates.

Phase II clinical trials.In Phase II clinical trials, controlled studies are conducted on approximately 100 to
300 volunteer patients with the targeted disease. The primary purpose of these tests is to evaluate the effectiveness of the drug on the volunteer patients as well as to determine if there are any
side effects. These studies generally take approximately two years, and may be conducted concurrently with Phase I clinical trials. In addition, Phase I/II clinical trials may be
conducted to evaluate not only the efficacy of the drug on the patient population, but also its safety.

Phase III clinical trials.This phase typically lasts about three years and usually involves 1,000 to 3,000 patients.
During the Phase III clinical trials, physicians monitor the patients to determine efficacy and to observe and report any reactions that may result from long-term use of the drug.

New drug application.After the completion of all three clinical trial phases, if there is substantial evidence that the drug
is safe and effective, an NDA is filed with the FDA. The NDA must contain all of the information on the drug gathered to that date, including data from the clinical trials. NDAs are often over 100,000
pages in length.

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The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. In such an event, the NDA must be
resubmitted with the additional information and, again, is subject to review before filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under
the Federal Food, Drug and Cosmetic Act, the FDA has 180 days in which to review the NDA and respond to the applicant. The review process is often significantly extended by FDA requests for
additional information or clarification regarding information already provided in the submission. The FDA may refer the application to an appropriate advisory committee, typically a panel of
clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. If FDA evaluations of the
NDA and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to
secure final approval of the NDA. When and if those conditions have been met to the FDA's satisfaction, the FDA will issue an approval letter, authorizing commercial marketing of the drug for certain
indications. If the FDA's evaluation of the NDA submission or manufacturing facilities is not favorable, the FDA may refuse to approve the NDA or issue a not approvable letter.

Marketing approval.If the FDA approves the NDA, the drug becomes available for physicians to prescribe. Periodic reports
must be submitted to the FDA, including descriptions of any adverse reactions reported. The FDA may request additional studies (Phase IV) to evaluate long-term effects.

Phase IV clinical trials and post marketing studies.In addition to studies requested by the FDA after approval, these
trials and studies are conducted to explore new indications. The purpose of these trials and studies and related publications is to broaden the application and use of the drug and its acceptance in
the medical community.

Orphan drug designation.The FDA may grant orphan drug designation to drugs intended to treat a "rare disease or condition,"
which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a NDA. After the FDA grants
orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or
shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication, except in very limited
circumstances, for seven years. Orathecin has received orphan drug designation from the FDA for treatment of pancreatic cancer. Decitabine has also received orphan drug designation from the FDA for
MDS, chronic myeloid leukemia, and acute leukemia.

Approvals outside of the United States.Steps similar to those in the United States must be undertaken in virtually every
other country comprising the market for our products before any such product can be commercialized in those countries. The approval procedure and the time required for approval vary from country to
country and may involve additional testing. There can be no assurance that approvals will be granted on a timely basis or at all. In addition, regulatory approval of prices is required in most
countries other than the United States. There can be no assurance that the resulting prices would be sufficient to generate an acceptable return to us.

FDA Modernization Act of 1997

The Food and Drug Administration Modernization Act of 1997 ("FDAMA") was enacted, in part, to ensure the timely availability of safe and effective drugs,
biologics and medical devices by expediting the FDA review process for new products. FDAMA establishes a statutory program for the approval of "fast track products." The fast track provisions
essentially codifies the FDA's Accelerated Approval

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regulations for drugs and biologics. A "fast track product" is defined as a new drug or biologic intended for the treatment of a serious or life-threatening condition that demonstrates
the potential to address unmet medical needs for such a condition. Under the new fast track program, the sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a
"fast track product" at any time during the clinical development of the product. FDAMA specifies that the FDA must determine if the product qualifies for fast track designation within 60 days
of receipt of the sponsor's request. Approval of an NDA for a fast track product can be based on an effect on a clinical endpoint or on a surrogate endpoint that is reasonably likely to predict
clinical benefit. Approval of a fast track product may be subject to post-approval studies to validate the surrogate endpoint or confirm the effect on the clinical endpoint, and prior
review of copies of all promotional materials. If a preliminary review of the clinical data suggests efficacy, the FDA may initiate review of sections of an application for a "fast track product"
before the application is complete. This "rolling review" is available if the applicant provides a schedule for submission of remaining information and pays applicable user fees. However, the
Prescription Drug User Fees Act time period does not begin until the complete application is submitted.

We
intend to seek fast track designation to secure priority review of Orathecin or other appropriate products. It is uncertain if fast track designation will be obtained. We cannot
predict the ultimate impact, if any, of the new fast track process on the timing or likelihood of FDA approval of any of our potential products.

Physicians
may prescribe drugs for uses that are not described in the product's labeling for uses that differ from those tested by us and approved by the FDA. Such
"off-label" uses are common across medical specialties and may constitute the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians
in their choice of treatments. The FDA does, however, restrict manufacturer's communications on the subject of off-label use. Companies cannot actively promote FDA-approved
drugs for off-label uses, but a recent court decision now allows them to
disseminate to physicians articles published in peer-reviewed journals, likeThe New England Journal of Medicine, that discuss
off-label uses of approved products. To the extent allowed by law, we intend to disseminate peer-reviewed articles on our products to our physician customers.

Extra drug development

Each Extra product candidate contains an active drug substance which has already been approved by the FDA and may already also have generic versions approved by
the FDA. The excipient for the Extra technology has also been approved by the FDA in a non-oncology application. To gain approval to market, we must provide data to the FDA to support the
safety, efficacy and quality of each Extra product, but these data may be more limited in scope and content than would be required for a new chemical entity. While extensive clinical trials may not be
required, we will be required to provide clinical data that demonstrate that the administration of our Extra formulation results in the same presence of the drug in the body as that of the generic
version, within clinically acceptable statistical guidelines. Overall, the data packages we will submit to the FDA for Extra product candidates may be smaller than a typical NDA and may take less time
to review.

We
also expect that, after the safety and quality of the Extra technology have been adequately demonstrated to the FDA, future Extra submissions will be able to cross-refer to these
data, further streamlining our submissions.

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Generic drug development

For certain drugs that are generic versions of previously approved products, there is an abbreviated FDA approval process. A sponsor may submit an Abbreviated
Application for:



An
Abbreviated Application need not contain the clinical and pre-clinical data supporting the safety and effectiveness of the product. The applicant must instead demonstrate
that the product is bioequivalent to the listed drug. FDA regulations define bioequivalence as the absence of a significant difference in the rate and the extent to which the active ingredient moiety
becomes available at the site of drug action when administered at the same molar dose under similar conditions in an appropriately designed study. If the approved generic drug is both bioequivalent
and pharmaceutically equivalent to the listed drug, the agency may assign a code to the product in an FDA publication that will represent a determination by the agency that the product is
therapeutically equivalent to the listed drug. This designation will be considered by third parties in determining whether the generic drug will be utilized as an alternative to the listed drug.

Patents and Proprietary Technology

We actively pursue a policy of seeking patent protection for our proprietary products and technologies, whether developed in-house or from outside
acquisition. We have acquired licenses to or assignments of numerous United States patents covering certain of our proprietary drugs and have received or licensed patents related to our Extra,
Partaject, and Oral Prodrug technologies.

In
addition to pursuing patent protection in appropriate cases, we rely on trade secret protection for our unpatented proprietary technology. We also pursue a policy of having our
employees and consultants execute proprietary information agreements upon commencement of employment or consulting relationships with us. These agreements provide that all confidential information
developed or made known to the individual during the course of the relationship is confidential except in specified circumstances.

Competition

There are many companies, both public and private, including well-known pharmaceutical companies that are engaged in the development and sale of
pharmaceutical products for some of the applications that we are pursuing. Our competitors and probable competitors include Eli Lilly, Ortho Biotech, Novartis, Aventis, Berlex, Bristol-Myers Squibb,
Immunex, and others. These companies have substantially greater financial, research and development, manufacturing and marketing experience and resources than we do and represent substantial
long-term competition for us. These companies may succeed in developing pharmaceutical products that are more effective or less costly than any we may develop or market.

Factors
affecting competition in the pharmaceutical industry vary depending on the extent to which the competitor is able to achieve a competitive advantage based on proprietary
technology. If we are able
to establish and maintain a significant proprietary position with respect to our proprietary products, competition will likely depend primarily on the effectiveness of the product and the number,

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gravity and severity of its unwanted side effects as compared to alternative products. Companies compete with respect to generic products primarily on price and, to a lesser extent, on name
recognition and the reputation of the manufacturer in its target markets. Moreover, the number of competitors offering a particular generic product could dramatically affect price and gross margin for
that product or an Extra product based on that generic product. We may be at a disadvantage in competing with more established companies based on price or market reputation. In addition, increased
competition in a particular generic market would likely lead to significant price erosion for our generic products and Extra products based on such generic products. This would have a negative effect
on our sales and potential gross profit margins. For example, we believe that the total estimated United States sales for our proposed generic products, and generic products upon which we propose to
base our Extra products, have decreased in recent years due to increased competition. We believe that sales volumes and unit prices of these generics may continue to decrease as a result of
competitive factors. These factors include the introduction of additional generics and other cancer drugs, the desire of some companies to increase their market share, new formulations for those drugs
and the use of different therapies.

Extensive
research and development efforts and rapid technological progress characterize the industry in which we compete. Although we believe that our proprietary position may give us a
competitive advantage with respect to our proposed nongeneric drugs, we expect development of new products to continue. Discoveries by others may render our current and potential products
noncompetitive. Our competitive position also depends on our ability to attract and retain qualified scientific and other personnel, develop effective proprietary products, implement development and
marketing plans, obtain patent protection and secure adequate capital resources.

Sales and Marketing

We currently have 37 employees focused on sales, marketing, and sales support of our products to cancer hospitals and clinics in the United States. The large
majority of these hospitals are members of hospital buying groups. We have focused our efforts on selling to these groups since they control a significant majority of the business in the oncology and
blood disorder pharmaceutical market. We also market our products, including Nipent, to private practice oncology clinics, oncology distributors and drug wholesalers. Oncologists/hematologists,
oncology nurses and oncology pharmacists are included in each of these classes of customers.

Since
acceptance of our products from each buying group can be time consuming, there may be significant delays before we can win bids and generate sales revenue. However, we have taken
significant steps toward product acceptance. A large number of these buying groups, including Premier Purchasing Partners, Novation, Kaiser Permanente, and the Department of Veteran Affairs, have
given us approved vendor status. In addition, we have gained recognition as an approved vendor in each state that requires registration or licensing before bidding for those customers.

There
are approximately 5,000 private practice oncologists/hematologists in the United States. These physicians usually purchase oncology products through distributors, with whom we have
developed relationships. The four major oncology distributors in the United States are Oncology Therapeutic Network Joint Venture, L.P., Florida Infusion Services, Inc., National
Specialty Services, Inc. and Priority Healthcare Corporation. These distributors control approximately 60% of the private practice oncology clinics, which in turn represent approximately 30% of
the oncology-related pharmaceutical market. We have taken significant steps in building relationships with these distributors, all of which distribute Nipent. Our sales force will also continue to
target the important private practice oncology clinics within their assigned territories. We also sell to large drug wholesalers that supply hospitals and hospital buying groups.

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Our
sales group is divided into three regions. Each region is headed by a manager with extensive industry experience who supervises specialty oncology sales representatives. We plan to
expand our sales force upon receipt of additional approvals of our products under development. Our sales and marketing group conducts direct sales, sponsors speakers' programs, works with
distributors, performs market research analysis, develops marketing strategies, creates and implements educational and promotional programs, establishes pricing and product advertising and maintains
compliance with hospital and other buying groups.

Manufacturing

We currently outsource manufacturing for all of our products to United States and foreign suppliers. We expect to continue to outsource manufacturing in the near
term. We believe our current suppliers will be able to efficiently manufacture our proprietary and generic compounds in sufficient quantities and on a timely basis, while maintaining product quality.
We maintain quality control over manufacturing through ongoing inspections, rigorous review, control over documented operating procedures, and thorough analytical testing by outside laboratories. We
believe that our current strategy of outsourcing manufacturing is cost-effective since we avoid the high fixed costs of plant, equipment, and large manufacturing staffs.

The
FDA must issue marketing clearance and deem a manufacturer acceptable under current Good Manufacturing Practices ("GMP's") before production of active pharmaceutical ingredients,
finished pharmaceuticals, or proprietary and generic drugs for commercial sale may begin. Once a proprietary or generic compound is manufactured on our behalf, it is sent to one or more domestic
manufacturers that process it into the finished proprietary, Extra or generic dosage forms. We currently follow these procedures for our marketed products, Nipent and mitomycin. We then ship our
finished proprietary and generic products to outside vendors for distribution to our customers.

We
have entered agreements with a domestic entity for the future production of our generic compounds required for both our Extra and generic dosage forms. We have licensed from this
manufacturer, on an exclusive basis, proprietary fermentation technology for anticancer antibiotic agents. In the future, we may adapt this proprietary fermentation technology to produce other bulk
generics.

In
December 1997, we received approval from the FDA to commercially manufacture Nipent at one of our designated vendors' manufacturing site using our proprietary manufacturing
process. This vendor declared bankruptcy in July 2001 and closed its manufacturing facility. We transferred the manufacturing of Nipent to a new vendor in 2001. We are currently working with
the FDA to have this new manufacturing site approved and expect approval early in the second quarter of 2002. However, if this approval is not received prior to the depletion of our inventory levels,
we may experience an interruption in sales of Nipent. We believe we own sufficient bulk inventory for the manufacture of Nipent to meet our clinical and commercial needs for the near future. In
April 1998, the FDA approved our application for the production and commercial distribution of mitomycin for injection. In November 2001, the FDA approved our application for the
production and commercial distribution of daunorubicin hydrochloride injection. For additional information about the possible risks to our business as a result of manufacturing issues, please see the
risk factor beginning "We depend on third parties for manufacturing" in the section of this report entitled "Management's Discussion and Analysis of Financial Condition and Results of
OperationsFactors Affecting Future Operating Results."

We
intend to continue evaluating our manufacturing requirements and may establish or acquire our own facilities to manufacture our products for commercial distribution if we feel doing
so would reduce costs or improve control and flexibility of product supply.

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Employees

As of December 31, 2001, we had 115 full-time employees. We use consultants and temporary employees to complement our staffing. Our employees
are not subject to any collective bargaining agreements, and we regard our relations with employees to be good.

Executive Officers and Management Team

Our current executive officers and their ages are as follows:

|Name                           |  | Age |  | Position                                       
|------------------------------ |  | --- |  | -----------------------------------------------
|Joseph Rubinfeld, Ph.D.        |  | 69  |  | Chief Executive Officer, President and Director
|Edward L. Jacobs               |  | 55  |  | Chief Business Officer/Chief Financial Officer 
|Karl L. Mettinger, M.D., Ph.D. |  | 58  |  | Senior Vice President, Chief Medical Officer   

Joseph Rubinfeld, Ph.D.co-founded the Company in 1991. He has served as Chief Executive Officer, President, and a
director of the Company since our inception and was Chief Scientific Officer from inception until September 1997. Dr. Rubinfeld was one of the four initial founders of Amgen in 1980 and
served as Vice President and Chief of Operations until 1983. From 1987 to 1990, he was a Senior Director at Cetus Corporation. From 1968 to 1980, Dr. Rubinfeld was employed at Bristol-Myers
Company International Division in a variety of positions, most recently as Vice President and Director of Research and Development. While at Bristol-Myers, Dr. Rubinfeld was instrumental in
licensing the original anticancer line of products for Bristol-Myers, including Mitomycin and Bleomycin. Before that time, Dr. Rubinfeld was a research scientist with several pharmaceutical and
consumer product companies including Schering-Plough Corporation and Colgate-Palmolive Co. He received his B.S. in chemistry from C.C.N.Y., and his M.A. and Ph.D. in chemistry from Columbia
University. Dr. Rubinfeld has numerous patents and/or publications on a wide range of inventions and developments, including the 10-second developer for Polaroid film, manufacture
of cephalosporins and the first commercial synthetic biodegradable detergent. In 1984, Dr. Rubinfeld received the Common Wealth Award for Invention.

Edward L. Jacobsrejoined SuperGen in October 2001 as Chief Business Officer and Chief Financial Officer. From February 2001
through September 2001, he served as President and Chief Executive Officer of ETEX Corporation. He originally came to SuperGen as Executive Vice President, Commercial Operations in
March 1999 and served in that position until January 2001. Prior to joining us in 1999 Mr. Jacobs served as Senior Vice President, Commercial Operations at Sequus
Pharmaceuticals, Inc. from November 1997 to March 1999. Between January 1995 and November 1997, Mr. Jacobs served as President and Chief Executive Officer of
Trilex Pharmaceuticals Inc., now Titan Pharmaceuticals. Prior to his association with Trilex, Mr. Jacobs served in a variety of senior management positions with pharmaceutical companies,
including Chief Executive at Transplant Therapeutics Inc., Vice President and General Manager of Syncor International Inc., Vice President at NEORX Corporation, Business Director of
Pharmacia and Upjohn (Adria Labs, Inc.), and Johnson & Johnson (McNeil). Mr. Jacobs received a B.A. in Political Science/Journalism from California State University at Northridge.

Karl Mettinger, M.D., Ph.D.,joined SuperGen in August 2000 as Senior Vice President and Chief Medical Officer. Prior
to coming to SuperGen, Dr. Mettinger was at IVAX Corporation/Baker Norton Pharmaceuticals for 11 years, where he served in a number of senior management positions, including Executive
Director, Clinical Research; Senior Director, Clinical Research; and Medical Director. Prior to IVAX, Dr. Mettinger was Deputy General Manager and Medical Director at KABI (currently
Pharmacia). He was also an associate professor at the Karolinska Institute and a physician at the Karolinska Hospital in Stockholm for fifteen years. Dr. Mettinger obtained his medical training
at the University of Lund, and his Ph.D. in the field of Hematology at the Karolinska Institute.

19

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In
addition, our management team includes the following individuals, with their relevant experience and years of industry service:

|Name                     |  | Title                                |  | Experience                                                                    
|------------------------ |  | ------------------------------------ |  | ------------------------------------------------------------------------------
|Frank Brenner            |  | V.P., National Accounts              |  | Adria Laboratories, Lederle International, Cetus Corporation27 years         
|L. Robert Cohen          |  | V.P., Investor Relations and Finance |  | Pfizer, Johnson & Johnson, Prudential-Bache Securities33 years               
|Timothy L. Enns          |  | V.P., Marketing                      |  | Upjohn, Adria, MGI Pharma, Syncor, Sequus21 years                            
|Frederick Grab, Ph.D.    |  | V.P., Compliance and CMC             |  | Bristol-Myers Squibb, Adria Laboratories, Wyeth Laboratories33 years         
|Audrey Jakubowski, Ph.D. |  | V.P., Regulatory Affairs             |  | Bristol-Myers Squibb, DuPont23 years                                         
|R. David Lauper, Pharm.D |  | V.P., Professional Services          |  | Bristol-Myers Squibb, Cetus-Chiron27 years                                   
|Robert Marshall          |  | V.P., Sales                          |  | OTN, IVEDCO, Syncor, Adria Laboratories, NeoRx31 years                       
|Lawrence Romel           |  | V.P., Clinical Operations            |  | Onyx, Sequus, Neurex, Kendall21 years                                        
|Howard Sands, Ph.D.      |  | V.P., Pre-Clinical Research          |  | Sparta Pharmaceuticals, DuPont26 years                                       
|Simeon Wrenn, Ph.D.      |  | V.P., Biotechnology                  |  | American Home Products, American Cyanamid, Purdue Frederick, Centocor23 years

ITEM 2. PROPERTIES.

Our principal administrative facility is currently located in leased general office space, containing approximately 50,000 square feet, in Dublin, California,
under a lease that expires in November 2010. Our laboratory operations are located in an industrial building in Pleasanton, California. We also possess a five year lease to a 10,000 square foot
office/warehouse space, adjacent to our laboratory facility, that is currently being subleased. We believe the above properties are suitable for our operations in the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

We are currently not subject to any material pending legal proceedings.

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

No matters were submitted to a vote of our stockholders during the fiscal quarter ended December 31, 2001.

20

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market for Common Stock

Our common stock trades on the Nasdaq National Market under the symbol "SUPG." The following table sets forth the high and low bid information for our common
stock for each quarterly period in the two most recent fiscal years as reported on the Nasdaq National Market:

High

Low2001Quarter ended March 31, 2001

$
15.25

$
8.03Quarter ended June 30, 2001


15.50


9.50Quarter ended September 30, 2001


13.76


6.47Quarter ended December 31, 2001


14.99


6.692000Quarter ended March 31, 2000

$
77.31

$
27.50Quarter ended June 30, 2000


49.00


19.13Quarter ended September 30, 2000


39.00


17.38Quarter ended December 31, 2000


23.69


10.63


Holders of Record

As of March 15, 2002, there were 540 holders of record of the common stock and approximately 25,000 beneficial stockholders.

Dividends

We have never paid cash dividends on our capital stock and do not expect to pay any dividends in the foreseeable future. We intend to retain future earnings, if
any, for use in our business.

Recent Sales of Unregistered Securities

None

ITEM 6. SELECTED FINANCIAL DATA.

The information set forth below is not necessarily indicative of results of future operations and should be read in conjunction with the financial statements and
notes thereto appearing in Item 14 of Part IV of this Report.

|                                     |  | Year ended December 31, |        
|------------------------------------ |  | ----------------------- | -------
|
|
|Total revenue                        |  | $                       | 11,451 
|Net loss                             |  |                         | (55,566
|Basic and diluted net loss per share |  |                         | (1.69  
|Total assets                         |  |                         | 122,717
|Total stockholders' equity           |  |                         | 107,798
|Long-term obligations                |  |                         |       
|Cash dividends per share             |  |                         |       

21

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our disclosure and analysis in this section of the report also contains forward-looking statements. When we use the words "anticipate," "estimate," "project,"
"intend," "expect," "plan," "believe," "should," "likely" and similar expressions, we are making forward-looking statements. Forward-looking statements provide our current expectations or forecasts of
future events. In particular, these statements include statements such as: the timing of filing of a new drug application for Orathecin; our estimates about becoming profitable; our forecasts
regarding our research and development expenses; and our statements regarding the sufficiency of our cash to meet our operating needs through December 2003. Any or all of these forward-looking
statements may turn out to be wrong. For example, our clinical data in our Orathecin clinical trials may not support filing of an NDA or the FDA may not approve our application if filed; the analysis
of our clinical trial data may be more complex than we anticipate causing delays; we may not be successful in commercializing our products and may not become profitable when planned or at all; our
research and development expenses may be larger than we currently anticipate; and our cash and capital resources may be insufficient to meet our needs. Inaccurate assumptions we might make and known
or unknown risks and uncertainties can affect our forward-looking statements. Consequently, no forward-looking statement can be guaranteed and our actual results may differ materially. We undertake no
obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Since our incorporation in 1991 we have devoted substantially all of our resources to our product development efforts. Our product revenues to date have been
limited and have been principally from sales of Nipent, which we are marketing in the United States for the treatment of hairy cell leukemia. As a result of our substantial research and development
expenditures and minimal product revenues, we have incurred cumulative losses of $183.7 million for the period from inception through December 31, 2001. These losses included
non-cash charges of $20.0 million for the acquisition of in-process research and development.

We
have completed patient enrollment in each of the three separate stand-alone pivotal Phase III clinical trials with Orathecin for treatment of pancreatic cancer. The three
studies"Gemzar refractory," where patients who failed treatment with Gemzar were randomized to either Orathecin or 5-FU; "Chemotherapy refractory," where patients who have
failed multiple types of chemotherapy are randomized to either Orathecin or the next best therapy; and "Chemotherapy naïve," where patients who have had no prior chemotherapy are
randomized to Orathecin or Gemzarhave enrolled a combined total of over 1,800 patients. We are still in the process of compiling and analyzing data from each of the three clinical trials.
Assuming favorable results from any one or a combination of our Phase III studies, we anticipate filing an NDA with the FDA in 2002. The trial design for each of the three studies allows
patients who initially were being treated with Gemzar or other therapies to "cross
over," or elect to be treated with Orathecin. At the time the trials were designed, based on results of cancer studies conducted by others, we believed that the percentage of patients that would cross
over for treatment with Orathecin would be in the range of 10% to 20% of the enrolled patients. Based on a preliminary review of the clinical trial information, we believe that the number of patients
in the first two studies that have actually crossed over to Orathecin has exceeded the number anticipated. This could affect the timing and statistical analysis of the studies. In early
April 2002, we will be convening a panel of experts to discuss strategies for filing an NDA for Orathecin.

We
have initiated a Phase III clinical program with decitabine for treatment of MDS, and are continuing to pursue Phase I and II clinical trials with Orathecin and a
number of other drug candidates for treatment of other cancers and hematological malignancies. We are also conducting trials

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with Nipent, currently approved for hairy cell leukemia, for use in other indications such as chronic lymphocytic leukemia, graft-versus-host disease, and non-Hodgkin's
lymphoma. To support these additional trials, we are also continuing to increase our clinical development staff.

We
expect to continue to incur operating losses at least through 2003. This is due primarily to projected spending for the development of our product candidates. The level of our
expenditures related to ongoing clinical trials has increased significantly throughout the current year as we expand the number of clinical trials and increase the patient accrual into these trials.
Our ability to become profitable will depend upon a variety of factors, including regulatory approvals of our products, the timing of the introduction and market acceptance of our products and
competing products, increases in sales and marketing expenses related to the launch of Orathecin and other drug candidates, if approved, and our ability to control our costs. If Orathecin is not
approved or commercially accepted we may remain unprofitable for longer than we currently anticipate.

In
late 1999, we entered into two agreements related to Orathecin with Abbott Laboratories under which Abbott would undertake to market and distribute Orathecin and under which Abbott
was obligated to make investments in the Company based on achievements of milestone events. We were to co-promote Orathecin with Abbott in the United States and Abbott had exclusive rights
to market Orathecin outside of the United States. In the U.S. market, we would have shared profits from product sales equally with Abbott. Outside the U.S. market, Abbott would have paid us royalties
and transfer fees based on product sales. On March 4, 2002, we mutually terminated these agreements with Abbott and they no longer have any marketing, promotion, or royalty rights relating to
Orathecin. We agreed to pay Abbott $1.6 million for development activities undertaken by Abbott and we relieved Abbott of any obligation to pay us further milestone payments. We continue to be
responsible for pursuing and funding the clinical development of Orathecin and obtaining regulatory approval for the product in the United States, Canada and the member states of the European Union.

Due
to the termination of the agreements with Abbott we now have the flexibility to pursue opportunities with Orathecin and other compounds on our own or with a new strategic partner. We
are currently evaluating our options as we work toward completion of the ongoing Orathecin trials and evaluate the trial results. Assuming we receive regulatory approval, if we elect to pursue
marketing of
Orathecin on our own we will be required to significantly increase our sales and marketing departments to a greater extent than currently planned.

As
part of our strategy, we intend either to market our products ourselves or co-promote these products with partners. In 2000, we entered into agreements with AVI related to
the development and marketing rights to Avicine, AVI's therapeutic vaccine for colorectal cancer, which is now entering Phase III clinical trials. Under these agreements, we will share U.S.
developmental and regulatory approval costs for Avicine and upon commercialization in the U.S., we will split all U.S. profits. AVI and SuperGen will jointly determine the optimum development strategy
for the international marketplace and will share all profits received. In addition to an up front equity investment, we are obligated to make additional payments to AVI based on successful achievement
of developmental, regulatory approval, and commercialization milestones over the next several years. As part of this agreement, we obtained the right of first discussion to all of AVI's oncology
compounds and an option to acquire an additional 10% of AVI's common stock. Avicine will require significant additional expenditures to complete the clinical development necessary to gain marketing
approval from the FDA and equivalent foreign regulatory agencies.

Critical Accounting Policies

Our significant accounting policies are more fully disclosed in Note 2 to our consolidated financial statements. However, some of our accounting policies
are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgement by our

23

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management. We believe the following critical accounting policies, among others, affect our more significant judgements and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our net sales relate principally to two pharmaceutical products. We recognize sales revenue upon shipment and related transfer of title to customers, with
allowances provided for estimated returns and exchanges. Cash advance payments received in connection with distribution agreements or research grants are deferred and recognized ratably over the
period of the respective agreements.

Our
principal customers are clinics, hospitals and hospital buying groups in the United States and drug distributors and wholesalers in the United States and Europe. We do not require
collateral from our customers.

Intangible Assets

Intangible assets, including trademarks, covenants not to compete, acquired workforce and customer lists, are stated at cost and amortized on a
straight-line basis over their estimated useful lives of six months to five years. Goodwill, which represents the excess of acquisition cost over the net assets acquired, is being
amortized on a straight-line basis over five years.

Use of Estimates

In preparing our financial statements to conform with accounting policies generally accepted in the United States, we make estimates and assumptions that affect
the amounts reported in our financial statements and accompanying notes. These estimates include useful lives for allowances for returns and exchanges, fixed assets for depreciation calculations, and
assumptions for valuing options and warrants.

Results of Operations

Year ended December 31, 2001 compared with year ended December 31, 2000

Revenues were $11.5 million in 2001 compared to $7.1 million in 2000. Revenues in 2001 included $9.7 million in Nipent sales in the U.S. and
$338,000 in sales to the European distributor for Nipent. Revenues in 2000 included $5.8 million in sales of Nipent exclusively in the U.S. marketplace. We did not record any European sales in
2000. Unlike our Nipent sales efforts in the U.S. market where we call on clinicians directly, our role in Europe is currently limited to that of a supplier. As such, we do not have a direct influence
on Nipent sales at the clinical level, making their timing and magnitude difficult to predict and dependent on the efforts of our European distributor. We expect our domestic sales of Nipent to
increase in 2002 and beyond as we pursue additional clinical research and publish data on the effectiveness of Nipent for other forms of leukemia and immunological disorders.

Cost
of sales as a percentage of net sales revenues was 26% in 2001 compared to 27% in 2000. The decline in cost of sales percentage was due primarily to 2001 sales to the European
distributor for Nipent that were made at a lower unit selling price under a supply agreement for sale outside North America. There were no European sales in 2000. To the extent that European sales
comprise a more significant portion of our total Nipent sales in 2002 we would expect our margins to decrease. Current margins may not be indicative of future margins due to possible variations in
average selling prices and manufacturing costs. We are in the process of qualifying a new party to manufacture Nipent and this new relationship could increase our costs or result in delays of
shipments.

Research
and development expenses were $47.8 million in 2001 compared to $31.4 million in 2000. Approximately $20.2 million of the total in 2001 related to direct
expenditures for Phase I, II, and III trials for Nipent, Orathecin, decitabine, and our other drug candidates, compared to approximately $9.9 million in 2000. The increased expense was due
primarily to the completion of enrollment of over

24

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1,800 patients into our Phase III clinical trial of Orathecin for pancreatic cancer, enrollment of approximately 800 patients into Phase I/II clinical trials of Orathecin in various
other indications, and initiation of our Phase III clinical trials of decitabine in advanced MDS. We do not expect that the Phase III trials for decitabine will be as costly as those for
Orathecin, and since the Orathecin trials completed enrollment in 2001, we believe that research and development expenditures will be lower in 2002 than in 2001. However, conducting clinical trials is
a lengthy, expensive and uncertain process. Completion of clinical trials may take several years or more. The length of time generally varies substantially according to the type, complexity, novelty
and intended use of the product candidate. Our clinical trials may be suspended at any time if we or the FDA believe the patients participating in our studies are exposed to unacceptable health risks.
We may encounter problems in our studies which will cause us or the FDA to delay or suspend the studies. Because of these uncertainties, we cannot predict when or whether we will successfully complete
the development of our product candidates or the ultimate product development cost.

Selling,
general and administrative expenses were $22.1 million in 2001 compared to $16.0 million in 2000. This increase was due primarily to costs associated with the
expansion of the sales, marketing, and professional service staffs, as well as increased costs associated with trade shows and conferences and symposiums. In addition 2001 reflects additional rent,
depreciation, and facility expenses related to our relocation to a 50,000 square foot facility in December 2000.

Acquisition
of in-process research and development totaled $1.6 million in 2000 and resulted from the acquisition of the intellectual property of AMUR
Pharmaceuticals, Inc. We had no such acquisitions in 2001.

Interest
income was $5.6 million in 2001 compared to $8.2 million in 2000. The decrease was due to lower available cash balances for investment and a decline in interest
rates.

Year ended December 31, 2000 compared with year ended December 31, 1999

Revenues were $7.1 million in 2000 compared to $4.7 million in 1999. Revenues in 2000 included $5.8 million in sales of Nipent exclusively in
the U.S. marketplace. Worldwide Nipent revenues of $4.3 million in 1999 included $3.0 million in U.S. sales and $1.3 million in sales to the European distributor for Nipent. We
have recorded no European sales in 2000. Unlike our Nipent sales efforts in the U.S. market where we call on clinicians directly, our role in Europe is currently limited to that of a supplier. As
such, we do not have a direct influence on Nipent sales at the clinical level, making their
timing and magnitude difficult to predict and dependent on the efforts of our European distributor. Revenues in 2000 also included recognition of $833,000 in revenues related to the Nipent
distribution arrangement with Abbott Laboratories, recognition of $50,000 in revenue associated with the completion of a clinical trial for busulfan in Europe, and recognition of $103,000 in grant
revenues from the National Institutes of Health/National Cancer Institute relating to the development of IPdR.

Cost
of sales as a percentage of net sales revenues was 27% in 2000 compared to 43% in 1999. The improvement in cost of sales percentage was due primarily to the absence in 2000 of sales
to the European distributor for Nipent, as such sales were made at a lower unit selling price under a supply agreement for sale outside North America. Current margins may not be indicative of future
margins due to possible variations in average selling prices and manufacturing costs.

Research
and development expenses were $31.4 million in 2000 compared to $17.3 million in 1999. The increased expense was due primarily to a broader clinical development
program along with its associated costs, expansion of the research and development staff, and a significant increase in the accrual rates of patients into our ongoing clinical trials.

Selling,
general and administrative expenses were $16.0 million in 2000 compared to $10.5 million in 1999. This increase was due primarily to costs associated with the
expansion of the sales, professional

25

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services, information technology and general and administrative staffs together with increased costs associated with trade shows, speakers' programs and symposiums, investor relations, business
development consulting and legal fees.

Acquisition
of in-process research and development totaled $1.6 million in 2000 and resulted from the acquisition of the intellectual property of AMUR
Pharmaceuticals, Inc. In 1999, acquisition of in-process research and development totaled $10.9 million, which included $7.5 million relating to the acquisition of the
drug candidates of Sparta Pharmaceuticals, Inc. and $3.4 million relating to the license of decitabine from Pharmachemie.

Interest
income was $8.2 million in 2000 compared to $1.0 million in 1999. The increase was due to the greater cash balances available for investment as a result of our
Abbott corporate partnership, our March 2000 follow-on offering of common stock, and the exercise of our SUPGW warrants and related underwriters' unit purchase warrants that we
issued in connection with our initial public offering in 1996.

Amortization
of loan commitment fees totaled $2.0 million in 1999. This charge was related to a credit arrangement that existed during 1999. We had no such credit arrangement in
2000 and consequently incurred no such charges during the period.

Liquidity and Capital Resources

Our cash, cash equivalents and both short and long term marketable securities totaled $74.0 million at December 31, 2001, compared to approximately
$130.6 million at December 31, 2000. In addition, at December 31, 2001 we held approximately 2.7 million shares of registered stock of AVI BioPharma, Inc., with a
market value of $29.3 million. Our ability to resell the shares of AVI stock may be impacted partially by the fact that Dr. Rubinfeld, our Chief Executive Officer, is a director of AVI,
which may require us to trade the shares during times when AVI insiders are not subject to any material undisclosed information. In addition, the registration statement covering our resale of shares
may be suspended or otherwise become unavailable requiring us to sell the shares subject to volume limitations.

The
net cash used in operating activities of $49.8 million in 2001 primarily reflected the net loss for the period of $55.6 million, offset by decreases in other
receivables, prepaid expenses, and other assets totaling $2.4 million, and an increase in accounts payable and other liabilities of $2.5 million.

In
September 2000, our Board authorized a stock repurchase plan to acquire, in the open market, an aggregate of up to one million shares of our common stock at prices not
to exceed $22 per share or $20 million in total. In March 2001, our Board authorized the repurchase of up to two million shares under this plan, provided that the total amount of
such repurchases does not exceed $20 million. During the year ended December 31, 2001, we repurchased 963,000 shares of common stock at a cost of approximately $9.1 million.
During the year ended December 31, 2000, we repurchased 184,500 shares of common stock at a cost of approximately $2.4 million.

We
believe that our current cash, cash equivalents and marketable securities will satisfy our cash requirements at least through December 2003. Our primary planned uses of cash
during that period are:



26

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Our
contractual obligations for the next five years and thereafter are as follows:

|                                                               |  | Payments Due by Period
|-------------------------------------------------------------- |  | ----------------------
|
|Operating Leases, net                                          |  | $                     
|Long term obligationscontractually obligated research funding |  |                       
|                                                               |  |                       
|Total contractual cash obligations                             |  | $                     
|                                                               |  |                       

The
contractually obligated research funding noted above consists primarily of required payments to the Stehlin Foundation and Peregrine. We are also obligated to potentially expend up
to a total of $88 million in milestone and development related payments to AVI and Peregrine for development of Avicine and VEGF technologies. We are unable to determine precisely when and if
our payment obligations under our agreements with AVI and Peregrine will become due as these obligations are based on a significant number of risks and uncertainties. Because certain of our payment
obligations
are based on milestone events that would not be triggered absent our receipt of revenues from the relationship, we may be able to use funds generated from these relationships to make the milestone
payments.

We
believe that our need for additional funding will increase in the future and that our continued ability to raise additional funds from external sources will be critical to our
success. We continue to actively consider future contractual arrangements that would require significant financial commitments. If we experience currently unanticipated cash requirements, we could
require additional capital much sooner than presently anticipated. We may seek such additional funding through public or private financings or collaborative or other arrangements with third parties.
We may not be able to obtain additional funds on acceptable terms, if at all.

Acquisition of In-Process Research and Development and Related Assets

Factors considered when evaluating IPR&D

Acquired in-process research and development ("IPR&D") represents the value assigned to research and development projects that were commenced but not
yet completed at the date of acquisition and which, if unsuccessful, have no alternative future use in research and development activities or otherwise. In accordance with Statement of Financial
Accounting Standards No. 2 "Accounting for Research and Development Costs," as interpreted by FASB Interpretation No. 4, amounts assigned to acquired IPR&D meeting the above criteria
must be expensed at the date of consummation of the transaction. Accordingly, we record a non-recurring charge for this acquired IPR&D at the date of acquisition.

The
development of any of the acquired IPR&D into technologically feasible and commercially viable products depends principally on the successful performance of additional clinical
trials. Though we currently expect that the acquired IPR&D will be successfully developed, the proposed products may never be commercially viable.

Year ended December 31, 2000

In September 2000, we acquired all of the intellectual property of Amur in exchange for 37,795 shares of our common stock and two-year warrants
to purchase 200,000 shares of our common stock at $40.00 per share. Amur's proprietary technology is based on a new water-soluble class of hormones. Investigation of these hormones determined that a
specific portion, phosphocholine, confers water

27

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solubility to the hormones. Amur's previously conducted research and development has shown that phosphocholine may be attached to other compatible molecules representing a novel patented drug
delivery technology. We recorded a charge of $1,585,000 in connection with this acquisition.

Year ended December 31, 1999



In August 1999, we completed our acquisition of Sparta, a biopharmaceutical company engaged in developing technologies and drugs for the treatment of a
number of life-threatening diseases, including cancer, cardiovascular disorders, chronic metabolic diseases and inflammation.

The
total cost of the acquisition was approximately $9.6 million, and consisted of the issuance of 429,082 shares of our common stock and 220,945 common stock warrants to the
former Sparta stockholders. Approximately $7.5 million of the purchase price was allocated to acquired IPR&D. The Sparta research and development programs were valued as follows:

Oral anticancer drug for the treatment of breast, colorectal and other cancers (5-FP, a prodrug of 5-FU)

$
3,430,000Chronic metabolic disease drug (PZG)


1,380,000Partaject method for the delivery of certain anti-cancer compounds


2,640,000$
7,450,000




We
identified and valued the purchased research and development through extensive interviews and discussions with appropriate management and scientific personnel. We also analyzed the
data provided by Sparta concerning Sparta's development projects, their respective stage of development, the time and resources needed to complete them, their expected income generating ability,
target markets, and associated risks. Using an income approach that reflects the present value of the projected free cash flows generated by each individual IPR&D project identified, we focused on the
income producing capabilities of the acquired technologies and quantified the present value of the future economic benefits expected to be derived from each. In the aggregate, we estimate that the
total remaining development costs necessary to advance the three drug candidates through the regulatory process will be approximately $45 million. We expect this regulatory development process
to occur over several years with potential product introductions through 2005. The effective tax rate utilized for the analysis was 40%. The discount rate used to value Sparta's IPR&D was 31%. The
discount rate considers an assumed weighted average cost of capital of 22% at the date of acquisition and a risk premium to reflect the risk associated with the stage of development of each of the
Sparta projects. Additional amounts of the purchase consideration were recorded as intangible assets related to existing licensing rights, acquired workforce and goodwill.

28

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In September 1999, we acquired worldwide rights to decitabine, a chemotherapeutic agent owned by Pharmachemie. Decitabine has been successful in multiple
Phase II trials in the United States and Europe for treating myelodysplastic syndromes, or MDS, chronic myeloid leukemia and acute myeloid leukemia. The FDA has not granted marketing approval
to use decitabine for the treatment of any disease.

In
the decitabine acquisition we issued 171,123 shares of unregistered common stock valued at $3.4 million, which we charged to IPR&D. In assigning the purchase price to IPR&D, we
considered, among other factors, our intentions for the future use of the acquired project, its stage of completion, the lack of alternative future uses of the technology, and that no other tangible
or intangible assets
were acquired. We believe decitabine has a unique mechanism of action that may demonstrate its effectiveness in acute leukemias and other hematological malignancies. We currently estimate that the
completion of the clinical trials and submission to the FDA of an NDA could occur in 2003 and the research and development costs to complete those processes will be approximately $6.0 to
$8.0 million. Revenues could begin with the introduction of a product in 2004.

Related Party Transactions

EuroGen Pharmaceuticals Ltd.

In September 2001, we entered into a Supply and Distribution Agreement with EuroGen Pharmaceuticals Ltd. ("EuroGen"), a company incorporated and
registered in England and Wales. The purpose of the agreement is to provide a means of furthering our access to European markets. Under the agreement, we granted EuroGen the exclusive European and
South African rights to promote and sell certain of our existing generic and other products or compounds. The agreement also establishes a process for granting EuroGen rights to sell additional
products in Europe and South Africa, subject to our compliance with our other existing licensing and distribution arrangements. After complying with these existing obligations, we will be required to
offer EuroGen the option to obtain European and South African rights to our future products. EuroGen will seek and pay for all necessary regulatory approvals and authorizations necessary for the
commercial sale of the products in the territories where they market and sell the products.

EuroGen
is not yet an operating company, but we intend to hold an equity interest in the company once it raises additional capital and is operational. At December 31, 2001 we had
loaned EuroGen $260,000 under a line of credit arrangement designed to cover start-up expenses. This amount is included in Due from related parties. If EuroGen is unable to adequately fund
its operations, we may not recover amounts owed to us or realize any income or benefit from the relationship.

KineMed, Inc.

In November 2001, we made an equity investment of $150,000 to acquire 100,000 shares of Series A Convertible Preferred stock of
KineMed, Inc., a start-up biotech company. The president and chief executive officer of KineMed is a former director of SuperGen. The president and chief executive officer of
SuperGen is a member of the Board of Directors of KineMed. We have accounted for this investment under the cost method as our ownership is less than 20% of KineMed's outstanding shares. This
investment is included on the balance sheet in Investment in stock of related parties.

AVI BioPharma, Inc.

In December 1999, we entered into an agreement with AVI BioPharma, Inc. ("AVI"). The chief executive officer of AVI is Dennis Burger, a member of
our Board of Directors. The president and chief executive officer of SuperGen is a member of the Board of Directors of AVI. The transaction was

29

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approved by members of our Board who had no interest in the transaction and evaluated the transaction with input from members of our financial and scientific staffs. Under the terms of the agreement,
we acquired one million shares of AVI common stock, which amounted to approximately seven and one half percent (7.5%) of AVI's outstanding common stock, for $2.5 million cash and 100,000
shares of our common stock at $28.25 per share. We also acquired exclusive negotiating rights for the United States market for Avicine, AVI's proprietary cancer vaccine currently in
late-stage clinical testing against a variety of solid tumors. Avicine is a non-toxic immunotherapy that neutralizes the effect of a tumor-associated antigen on cancer cells,
while stimulating the body's immune system to react against the foreign tumor.

In
July 2000, we finalized an agreement with AVI to obtain the U.S. marketing rights for Avicine. We issued 347,826 shares of our common stock along with $5 million in cash
to AVI as payment for our investment, in exchange for 1,684,211 shares of AVI common stock. As part of this agreement, we obtained the right of first discussion to all of AVI's oncology compounds and
an option to acquire an additional 10% of AVI's common stock for $35.625 per share. This option is exercisable for a three-year period commencing on the earlier of the date the FDA accepts
the NDA submitted for Avicine or the date on which the closing price of AVI's common stock exceeds the option exercise price. We have accounted for the investment in AVI under the cost method as our
ownership is less than 20% of AVI's outstanding shares. No value has been ascribed to the option as neither of the measurements have been achieved as of December 31, 2001.

Avicine
will require significant additional expenditures to complete the clinical development necessary to gain marketing approval from the FDA and equivalent foreign regulatory
agencies. As part of this agreement, we are obligated to make additional payments to AVI based on successful achievement of developmental, regulatory approval, and commercialization milestones over
the next several years that could total $80 million. At December 31, 2001, we owed AVI approximately $1.2 million relating to our share of the development costs for Avicine. This
amount is included in Accounts Payable. More detail on the timing of the potential milestone payments to AVI is set forth in our discussion of liquidity and capital resources.

AMUR Pharmaceuticals, Inc.

Two of our former directors were formerly directors of AMUR Pharmaceuticals, Inc., a privately-held company conducting research and development
work that we partially funded. The president of Amur performed consulting services for SuperGen and was paid $180,000 in 2001, $152,000 in 2000 and $68,000 in 1999 for these consulting services. In
addition, in September 1999 this individual was granted
an option to purchase 5,000 shares of SuperGen stock. Using the Black Scholes option valuation model, this option was valued at $44,000 and amortized to expense over one year. In
September 2000, we acquired all of the intellectual property of Amur in exchange for 37,795 shares of our common stock and two-year warrants to purchase 200,000 shares of our common
stock at $40.00 per share. The transaction was evaluated by our internal scientific staff and the financial arrangements were approved by our entire Board of Directors.

Family Relationships

The Company employs a number of individuals who are immediate family members of Dr. Joseph Rubinfeld, President, Chief Executive Officer, and director of
the Company. None of these family members are officers or directors of the Company.

Recently Issued Accounting Standards

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142
"Goodwill and Other Intangible Assets" ("SFAS 142").

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SFAS 141 requires that all business combinations be accounted for by the purchase method of accounting and changes the criteria for recognition of intangible assets acquired in a business
combination. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. We do not expect that the adoption of SFAS 141 will have a material
effect on our financial position or results of operations. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized; however, these assets must
be reviewed at least annually for impairment. Intangible assets with finite useful lives will continue to be amortized over their respective useful lives. The standard also establishes specific
guidance for testing for impairment of goodwill and intangible assets with indefinite useful lives. We will adopt SFAS 142 effective January 1, 2002, and accordingly, we will cease
amortizing goodwill and certain intangibles. At December 31, 2001, we had approximately $730,000 in goodwill.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 144 amends existing accounting guidance on asset impairment and provides a single accounting model for long-lived assets to be disposed of. Among other
provisions, the new rules change the criteria for classifying an asset as held-for-sale. The standard also broadens the scope of businesses to be disposed of that qualify for
reporting as discontinued operations, and changes the timing of recognizing losses on such operations. The provisions of SFAS 144 will be effective for our fiscal year 2002. We do not expect
that the adoption of SFAS 144 will have a material effect on our financial statements.

Factors Affecting Future Operating Results

You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below
are not the only ones facing our company. Our business operations may be impaired by additional risks and uncertainties that we do not know of or that we currently consider
immaterial.

This report also contains and incorporates by reference forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this report.

If the results of further clinical testing indicate that our proposed products are not safe and effective for human use, our business will suffer.

Most of our products are in the development stage and prior to their sale will require the commitment of substantial resources. All of the potential proprietary
products that we are currently developing will require extensive pre-clinical and clinical testing before we can submit any application for regulatory approval. Before obtaining regulatory
approvals for the commercial sale of any of our products, we must demonstrate through pre-clinical testing and clinical trials that our product candidates are safe and effective in humans.
Conducting clinical trials is a lengthy, expensive and uncertain process. Completion of clinical trials may take several years or more. The length of time generally varies substantially according to
the type, complexity, novelty and intended use of the product candidate. Our clinical trials may be suspended at any time if we or the FDA believe the patients participating in our studies are exposed
to unacceptable health risks. We may encounter problems in our studies which will cause us or the FDA to delay or suspend the studies. Our commencement and rate of completion of clinical trials for
all of our drug development programs may be delayed by many factors, including:



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The
clinical results we have obtained to date do not necessarily predict that the results of further testing, including later-stage controlled human clinical testing, will be successful
or result in regulatory approval. If our trials are not successful, or are perceived as not successful by the FDA or physicians, our business, financial condition and results of operations will be
harmed.

If we fail to obtain regulatory marketing approvals in a timely manner, our business will suffer.

Even if we believe our trials are successful, the FDA may require substantial additional clinical testing and, therefore, we would have to commit additional
unanticipated resources. The FDA has substantial discretion in the drug approval process. We cannot assure you that we will submit for or obtain the necessary regulatory approvals to market our
products. The FDA and comparable agencies in foreign countries impose substantial requirements for the introduction of both new pharmaceutical products and generic products through lengthy and
detailed clinical testing procedures, sampling activities and other costly and time-consuming compliance procedures. We have not yet applied for nor received marketing approval for any of
our internally developed proprietary products. Our proprietary drugs and
products will require lengthy clinical trials along with FDA and comparable foreign agency review as new drugs. Our generic drugs will also require regulatory review and approval.

We
cannot predict with certainty if or when we might submit for regulatory review those products currently under development. Once we submit our potential products for review, we cannot
assure you that the FDA or other regulatory agencies will grant approvals for any of our pharmaceutical products on a timely basis or at all. Sales of our products outside the United States will be
subject to regulatory requirements governing clinical trials and marketing approval. These requirements vary widely from country to country and could delay the introduction of our products in those
countries.

If regulatory approval for Orathecin is not supported by our clinical data or if filing or approval of a New Drug Application with the FDA is delayed our business will be
harmed.

We have expended significant resources on developing Orathecin and preparing an infrastructure to support its sales and marketing if approved for sale by
regulatory authorities. While we believe we have a portfolio of product candidates with promise, we have focused much of our attention and resources on developing Orathecin. Our ongoing
Phase III Orathecin clinical trials are large and complex and are requiring a significant amount of time and statistical analysis. For example, the trial design of these studies allows patients
who initially were being treated with Gemzar or other therapies to elect to be treated with Orathecin. At the time the trials were designed, based on results of cancer studies conducted by others, we
believed that the percentage of patients that would cross over for treatment with Orathecin would be in the range of 10% to 20% of the enrolled patients. Based on a preliminary review of the clinical
trial information, we believe that the number of patients in two of the studies that have actually crossed over to treatment with Orathecin has exceeded the number anticipated. This cross over could
affect the statistical analysis of the study. There is no assurance that the data or statistical analysis from these trials will support an NDA or that we will not be required to

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perform additional studies. If we are able to file an NDA, the approval process may take a significant amount of time and we may not be approved. If our Orathecin development activities are
unsuccessful for these or other reasons our business will be harmed.

The termination of our Orathecin related agreements with Abbott may negatively impact our business.

While we believe that the termination of our agreements with Abbott are advantageous to us in a number of respects, the termination also creates some challenges
and uncertainties. By terminating our Orathecin related agreements we have eliminated restraints on our business activities and expanded some of our strategic alternatives which we deem very
beneficial. At the same time we have foregone the opportunity to receive future milestone payments and other potential revenue and benefits from a well established and respected pharmaceutical
company. In this respect the termination of the Abbott agreements may negatively impact our liquidity as we can not offset our development expenses with milestone payments. In addition, the
termination of the agreements may be perceived negatively by other potential partners and may make it difficult for us to pursue opportunities with Orathecin or any
other of our proprietary compounds. Because strategic relationships are critical to our business strategy and success, such a perception may negatively impact our business.

Expanding indications for Nipent is important to our future revenues. If we are unable to receive regulatory approval for use of Nipent to treat additional diseases our
revenues will not expand as hoped.

Part of our strategy involves expanding the market opportunities for our approved drugs by seeking approval of their use for treatment of additional diseases.
Nipent, which has provided over 80% of our revenues in the past three years, is a product that we believe has promise for treatment of a variety of diseases. We are conducting a series of clinical
trials with Nipent that are important to the expansion of our business. These trials include Phase IV trials for chronic lymphocytic leukemia, low grade non-Hodgkin's lymphoma,
cutaneous and peripheral T-cell lymphomas, and Phase II/III studies for graft-versus-host disease. If these and our other Nipent clinical trials are not successful our
business may not develop as planned.

We have a history of operating losses and an accumulated deficit, we may not achieve or maintain profitability in the future, and we may need to obtain additional
funding.

We incurred cumulative losses of $183.7 million for the period from inception through December 31, 2001. Currently we are not profitable and we
expect to continue to incur substantial operating losses at least through 2003. Our ability to achieve profitability will depend primarily on our ability to obtain regulatory approval for and
successfully commercialize Orathecin. If Orathecin is not approved or not commercially successful we will not become profitable for a much longer period, if at all. Our success will also depend, to a
lesser extent, on our ability to develop and obtain regulatory approval of Nipent for indications other than hairy cell leukemia and to bring our proprietary products to market. Our ability to become
profitable will also depend upon a variety of other factors, including the following:



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We
cannot predict the outcome of these factors and we cannot assure you that we will ever become profitable.

Even
if we do become profitable, we may need substantial additional funding. We expect that our rate of spending will accelerate as a result of increased clinical trial costs and
expenses associated with regulatory approval and commercialization of our products now in development. We anticipate that our capital resources will be adequate to fund operations and capital
expenditures at least through 2003. However, if we experience unanticipated cash requirements during this period, we could require additional funds much sooner. Our business, results of operations and
cash flows will be adversely affected if we fail to obtain adequate funding in a timely manner, or at all. We may receive funds from the sale of equity securities, or the exercise of outstanding
warrants and stock options. However, we cannot assure you that any of those fundings will occur, or if they occur, that they will be on terms favorable to us. Also, the dilutive effect of those
fundings could adversely affect our results per share.

We depend on third parties for manufacturing and storage of our products and our business may be harmed if the manufacture of our products is interrupted or discontinued.

We have no manufacturing facilities and we currently rely on third parties for manufacturing activities related to all of our products. As we develop new products
and increase sales of our existing products, we must establish and maintain relationships with manufacturers to produce and package sufficient supplies of our finished pharmaceutical products,
including Nipent and Orathecin.

Our
manufacturing strategy presents the following risks:



Any
of these factors could delay clinical trials or commercialization of our products under development, interfere with current sales, entail higher costs, and result in our being unable
to effectively sell our products. In addition, we may be unable to locate replacement supply sources, or the sources that we may locate may not be approved by regulatory authorities or provide us with
similar reliability or pricing and our business could suffer. For example, the company that had been purifying our Nipent finished product filed for bankruptcy. We anticipate that our current
inventory levels will meet our domestic sales needs through the first quarter of 2002, and we have contracted with a new manufacturer for the purification of Nipent. However, this manufacturer must
still be approved

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by the FDA. If this approval is not received prior to the depletion of our inventory levels, we may experience an interruption in sales of Nipent. Any such delays may result in cancellation of orders
and reduce our revenues and may also be harmful to our reputation as a reliable supplier.

In
addition, we store the majority of the unpurified, bulk form of Nipent at a single location. Improper storage, fire, natural disaster, theft or other conditions at this location that
may lead to the loss or destruction of the bulk concentrate could adversely affect our business, results of operations and cash flows.

We
do not currently intend to manufacture any pharmaceutical products, although we may choose to do so in the future. If we decide to manufacture products, we would be subject to the
regulatory risks and requirements described above. We will also be subject to similar risks regarding delays or difficulties encountered in manufacturing these pharmaceutical products and we will
require additional facilities and substantial additional capital. In addition, we have only limited experience in manufacturing pharmaceutical products. We cannot assure you that we would be able to
manufacture
any of these products successfully in accordance with regulatory requirements and in a cost-effective manner.

We have limited sales and marketing capabilities and no distribution capabilities and may not be able to successfully commercialize our products.

We currently have limited sales and marketing resources and no distribution capability. Although we have 27 sales and marketing personnel focusing on the sale of
our products to hospitals and hospital buying groups, we anticipate relying on third parties to sell and market some of our primary products. For example, before the termination of our Orathecin
agreements with Abbott we anticipated relying on Abbott to assist in the distribution and sale of Orathecin. Our current sales and marketing resources are inadequate to effectively market and sell
Orathecin and we may not be able to enter into additional sales and marketing arrangements with others on acceptable terms, if at all. If our arrangements with third parties are not successful, or if
we are unable to enter into third-party arrangements, then we may need to substantially expand our sales and marketing force. We may not succeed in enhancing our sales and marketing capabilities or
have sufficient resources to do so. If we do develop such capabilities, we will compete with other companies that have experienced and well-funded sales and marketing operations. We
currently rely on third parties to distribute our products and expect to continue to do so in the future. If we fail to establish successful sales and marketing capabilities or fail to enter into
successful marketing arrangements with third parties, or if our third party distributors fail to perform their obligations, our business, financial condition and results of operations will be
materially and adversely affected.

Our strategic relationships with AVI and Peregrine could cause us to expend significant money on development costs with no assurance of financial return.

Under our strategic relationships with AVI and Peregrine, in exchange for marketing and other rights, we have agreed to make equity investments, fund clinical
development activities, and pay license fees. The compounds underlying these strategic relationships may prove to be ineffective, may fail to receive regulatory approvals, may be unprotectable by
patents or other intellectual property rights, or may otherwise not be commercially viable. If these strategic relationships are not successful our business will be materially and adversely affected.

If we fail to comply with the governmental regulations, our business will suffer.

All new drugs, including our products under development, are subject to extensive and rigorous regulation by the FDA, and comparable agencies in state and local
jurisdictions and in foreign countries. These regulations govern, among other things, the development, testing, manufacturing,

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labeling, storage, pre-market approval, advertising, promotion, sale and distribution of our products. Satisfaction of these requirements typically takes several years and the time needed
to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. The effect of government regulation may be to delay or to prevent marketing of our
potential products for a considerable period of time and to impose costly procedures upon our activities. If regulatory approval of our products is granted, such approval may impose limitations on the
indicated uses for which our products may be marketed. Further, even if regulatory approval is obtained for a product, later discovery of previously unknown problems may result in restrictions of the
product, including withdrawal of the product from the market.

Among
the conditions for FDA approval of all of our products in development is the requirement that the manufacturer's (at either our facilities or those of a third party manufacturer)
quality control and manufacturing procedures conform to current Good Manufacturing Practices, which must be followed at all times. The FDA and foreign regulatory authorities strictly enforce GMP
requirements through periodic unannounced inspections. We cannot assure you that the FDA will determine that our facilities and manufacturing procedures or any third party manufacturer of our products
will conform to GMP requirements. Additionally, we, or our third party manufacturer, must pass a pre-approval inspection before we can obtain marketing approval for any of our products in
development. Failure to comply with applicable FDA and other regulatory requirements can result in sanctions being imposed on us or the manufacturers of our products including warning letters, product
recalls or seizures, injunctions, refusals to permit products to be imported into or exported out of the United States, refusals of the FDA to grant pre-market approval or to allow us to
enter into government supply contracts, withdrawals of previously approved marketing applications, civil fines and criminal prosecutions.

We
and our contract research organizations are also required to comply with current GCP regulations and guidelines enforced by the FDA for all of our products in clinical development.
FDA enforced GCPs through periodic inspections of study sponsors, principal investigators, and study sites. If we or our contract research organizations fail to comply with applicable GCPs, the
clinical data generated in our studies may be deemed unreliable and FDA may require us to perform additional studies before approving our marketing applications. We cannot assure you that FDA will
determine that any of our studies for products in clinical development comply with GCPs.

The
FDA's policies may change and additional government regulations may be promulgated which could prevent or delay regulatory approval of our products. We cannot predict the likelihood
of adverse governmental regulation which may arise from future legislative or administrative action, either in the United States or abroad.

If we fail to compete effectively, particularly against larger, more established pharmaceutical companies with greater resources, our business will suffer.

Factors affecting competition in the pharmaceutical industry vary depending on the extent to which the competitor is able to achieve a competitive advantage based
on proprietary technology. These factors include financial resources, research and development capabilities, and manufacturing and marketing experience and resources. If we are able to establish and
maintain a significant proprietary position
with respect to our proprietary products, competition will likely depend primarily on the effectiveness of our products, their acceptance in the marketplace and their pricing and the number, gravity
and severity of their unwanted side effects as compared to alternative products.

Our
competitors have substantially greater financial, research and development, manufacturing and marketing experience and resources than we do and represent substantial
long-term competition for us. These competitors and probable competitors include established companies such as Eli Lilly & Co., Ortho Biotech, Berlex, Bristol-Myers Squibb
Company, Immunex Corp and others. If these companies

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succeed in developing pharmaceutical products that are more effective or less costly than any that we may develop or market, our business will suffer.

The patents on the compounds for which we are developing generic and Extra products are held by third parties. If these patents are expanded in scope or do not expire when
anticipated, our business could suffer.

We plan to develop and market several generic and Extra drugs based on existing compounds, some of which are currently protected by one or more patents held by
others. If the existing patent protection for these drugs is maintained or expanded, it is unlikely that we will be able to market our own generic and Extra versions of those drugs without obtaining a
license from the patent owner, which may not be available on commercially acceptable terms, or at all.

Asserting, defending and maintaining intellectual property rights could be difficult and costly and failure to do so will harm our ability to compete and the results of our
operations.

If competitors develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, if our trade secrets are
disclosed or if we cannot effectively protect our rights to unpatented trade secrets, our business will be harmed.

The
pharmaceutical fields are characterized by a large number of patent filings. A substantial number of patents have already been issued to other pharmaceutical companies, research or
academic institutions or others. Competitors may have filed applications for or have been issued patents and may obtain additional patents and proprietary rights related to products or processes that
compete with or are similar to ours. We may not be aware of all of the patents potentially adverse to our interests that may have been issued to others.

We
actively seek patent protection for our proprietary products and technologies. We have a number of United States patents and also have licenses to, or assignments of, numerous patents
issued both in the
United States and elsewhere. We may also license our patents outside the United States. Limitations on patent protection outside the United States, and differences in what constitutes patentable
subject matter in countries outside the United States, may limit the protection we have on patents or licenses of patents outside the United States.

Litigation
may be necessary to protect our patent position, and we cannot be certain that we will have the required resources to pursue the necessary litigation or otherwise to protect
our patent rights. Our efforts to protect our patents may fail. In addition to pursuing patent protection in appropriate cases, we also rely on trade secret protection for unpatented proprietary
technology. However, trade secrets are difficult to protect. Our trade secrets or those of our collaborators may become known or may be independently discovered by others.

Our
proprietary products are dependent upon compliance with numerous licenses and agreements. These licenses and agreements require us to make royalty and other payments, reasonably
exploit the underlying technology of the applicable patents, and comply with regulatory filings. If we fail to comply with these licenses and agreements, we could lose the underlying rights to one or
more of these potential products, which would adversely affect our business, results of operations and cash flows.

From
time to time we receive correspondence inviting us to license patents from third parties. Although we know of no pending patent infringement suits, discussions regarding possible
patent infringements or threats of patent infringement litigation either related to patents held by us or our licensors or our products or proposed products, there has been, and we believe that there
will continue to be, significant litigation in the pharmaceutical industry regarding patent and other intellectual property rights. Claims may be brought against us in the future based on patents held
by others. These persons could bring legal actions against us claiming damages and seeking to enjoin clinical testing,

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manufacturing and marketing of the affected product. If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If
any of these actions are successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product. We cannot
assure you whether we would prevail in any of these actions or that we could obtain any licenses required under any of these patents on acceptable terms, if at all.

If we lose key personnel or are unable to attract and retain additional, highly skilled personnel required for the expansion of our activities, our business will suffer.

Our success is dependent on key personnel, including Dr. Rubinfeld, our President and Chief Executive Officer, and members of our senior management and
scientific staff. To successfully expand our operations, we will need to attract and retain additional, highly skilled individuals, particularly in the areas of sales, marketing, clinical
administration, manufacturing and finance. We compete with other companies for the services of existing and potential employees. We believe our compensation and benefits packages are competitive for
our geographical region and our industry group. However, we
may be at a disadvantage to the extent that potential employees may favor larger, more established employers.

The continuing efforts of government and third-party payers to contain or reduce the costs of healthcare may adversely affect our revenues and profitability.

Our revenues and profitability may be affected by the continuing efforts of governmental and third-party payers to contain or reduce the costs of health care. We
cannot predict the effect that these health care reforms may have on our business, and it is possible that any of these reforms will adversely affect our business. In addition, in both the United
States and elsewhere, sales of prescription pharmaceuticals are dependent in part on the availability of reimbursement to the consumer from third-party payers, like government and private insurance
plans. Third-party payers are increasingly challenging the prices charged for medical products and services. If our current and proposed products are not considered cost-effective,
reimbursement to the consumer may not be available or be sufficient to allow us to sell products on a competitive basis.

We may be subject to product liability lawsuits and our insurance may be inadequate to cover damages.

Clinical trials or marketing of any of our current and potential products may expose us to liability claims from the use of these products. We currently carry
product liability insurance. However, we cannot be certain that we will be able to maintain insurance on acceptable terms for clinical and commercial activities or that the insurance would be
sufficient to cover any potential product liability claim or recall. If we fail to have sufficient coverage, our business, results of operations and cash flows could be adversely affected.

If we are unable to comply with environmental laws and regulations, our business may be harmed.

We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste
products. We currently maintain a supply of several hazardous materials at our facilities. In the event of an accident, we could be held liable for any damages that result, and the liability could
exceed our resources. While we currently outsource our research and development programs involving the controlled use of biohazardous materials, if in the future we conduct these programs, we might be
required to incur significant cost to comply with environmental laws and regulations.

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Business interruptions could adversely affect our business.

Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure and other events beyond our control. We do not have a
detailed disaster recovery plan. Our facilities in the state of California have been subject to electrical blackouts as a consequence of a shortage of available electrical power. In the event these
blackouts resume or increase in severity, they could disrupt the operations of our affected facilities. In addition, we do not carry sufficient business interruption insurance to compensate us for
losses that may occur and any losses or damages incurred by us could have a material adverse effect on our business.

Anti-takeover provisions may prevent you from realizing a premium return.

Anti-takeover provisions of our certificate of incorporation and bylaws make it more difficult for a third party to acquire us, even if doing so would
be beneficial to our stockholders. These provisions include:



Our
bylaws establish procedures, including notice procedures, with regard to the nomination, other than by or at the direction of our board of directors, of candidates for election as
directors or for stockholder proposals to be submitted at stockholder meetings.

We
are also subject to Section 203 of the Delaware General Corporation Law, an anti-takeover provision. In general, Section 203 of the Delaware General
Corporation Law prevents a stockholder owning 15% or more of a corporation's outstanding voting stock from engaging in business combinations with a Delaware corporation for three years following the
date the stockholder acquired 15% or more of a corporation's outstanding voting stock. This restriction is subject to exceptions, including the approval of the board of directors and of the holders of
at least two-thirds of the outstanding shares of voting stock not owned by the interested stockholder.

These
provisions are expected to discourage different types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company
to first negotiate with us.

We
believe that the benefits of increased protection of our potential ability to negotiate with the proponents of unfriendly or unsolicited proposals to acquire or restructure us
outweigh the disadvantages of discouraging those proposals because, among other things, negotiation of those proposals could result in an improvement of their terms.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Due to the short-term nature of our interest bearing assets, which consist primarily of certificates of deposit, U.S. corporate obligations, and U.S.
government obligations, we believe that our exposure to interest rate market risk would not significantly affect our operations.

Our
investment policy is to manage our marketable securities portfolio to preserve principal and liquidity while maximizing the return on the investment portfolio. Our marketable
securities portfolio is primarily invested in corporate debt securities with an average maturity of under one year and a minimum investment grade rating of A or A-1 or better to minimize
credit risk. Although changes in interest rates may affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless
the investments were to be sold prior to maturity.

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Our
investments in marketable equity securities are subject to fluctuations from market value changes in stock prices. Non-marketable equity securities are carried at cost.
We periodically monitor the liquidity progress and financing activities of these entities to determine if impairment write-downs are required.

We
do not use or hold derivative financial instruments.

We
operate primarily in the United States and all product sales are denominated in U.S. dollars. Accordingly, we do not have any exposure to foreign currency rate fluctuations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All information required by this item is included on pages F-1 to F-24 in Item 14 of Part IV of this Report and is
incorporated into this item by reference.

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information regarding our Board of Directors is incorporated by reference to the section entitled "Election of Directors" appearing in our proxy statement for the
annual meeting of stockholders to be filed with the Commission by April 30, 2002. Certain information with respect to persons who are or may be deemed to be executive officers of the Registrant
is set forth under the caption "Executive Officers of the Registrant" in Part I of this report.

ITEM 11. EXECUTIVE COMPENSATION.

Information regarding executive compensation is incorporated by reference to the information set forth under the caption "Executive Compensation" in our Proxy
Statement for the Annual Meeting of Stockholders to be filed with the Commission by April 30, 2002.

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

Information regarding security ownership of certain beneficial owners and management is incorporated by reference to the information set forth under the caption
"Voting Securities of Principal Stockholders and Management" in our Proxy Statement for the Annual Meeting of Stockholders to be filed with the Commission by April 30, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information regarding certain relationships and related transactions is incorporated by reference to the information set forth under the caption "Certain
Transactions" in our Proxy Statement for the Annual Meeting of Stockholders to be filed with the Commission by April 30, 2002. Certain of our relationships and related transactions are
addressed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Report.

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PART IV

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

(a)  The
following documents are filed as part of this Report:



PageReport of Ernst & Young LLP, Independent Auditors

F-1Consolidated Balance Sheets

F-2Consolidated Statements of Operations

F-3Consolidated Statement of Changes in Stockholders' Equity

F-4Consolidated Statements of Cash Flows

F-5Notes to Consolidated Financial Statements

F-6




|Exhibit
Number |  | Description of Document                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|(f)3.1         |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                          
|(ff)3.2        |  | Bylaws of the Registrant, as amended and restated through May 30, 2001                                                        
|(m)4.1         |  | Specimen Common Stock Certificate.                                                                                            
|(a)4.2         |  | Form of Representative's Warrant.                                                                                             
|(a)4.3         |  | Form of Warrant Agreement dated March 11, 1996 (including form of Common Stock Purchase Warrant).                             
|(l)10.1        |  | Form of Indemnification Agreement between the Registrant and each of its directors and officers.                              
|(cc)(s)10.2    |  | 1993 Stock Option Plan (as amended through July 11, 2000).                                                                    
|(i)(s)10.3     |  | Forms of stock option agreements under the 1993 Stock Option Plan.                                                            
|(n)(s)10.4     |  | 1996 Directors' Stock Option Plan, as amended effective February 7, 2001                                                      
|(c)(s)10.5     |  | Employees and Consultants Stock Option Agreement/Plan.                                                                        
|(n)(s)10.6     |  | 1998 Employee Stock Purchase Plan, as amended February 7, 2001                                                                
|(b)(q)10.7     |  | Patent License and Royalty Agreement dated August 30, 1993 between the Registrant and The Jackson Laboratory.                 
|(b)(q)10.8     |  | Worldwide License Agreement dated March 1, 1994 between the Registrant and Janssen Biotech, N.V.                              
|(b)(q)10.9     |  | Patent License Agreement dated March 1, 1994 between the Registrant and Cyclex Inc.                                           
|(b)(q)10.10    |  | Patent License and Royalty Agreement dated November 15, 1993 between the Registrant and The Long Island Jewish Medical Center.
|(b)(q)10.11    |  | License Agreement dated February 1, 1995 between the Registrant and Pharmos Corporation.                                      

41

---

|(i)10.12    |  | Common Stock Sale/Repurchase Agreement dated August 6, 1997 between Israel Chemicals, Ltd. ("ICL") and the Registrant.                                                                                                                  
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(m)10.13    |  | First Amendment to Common Stock Sale/Repurchase Agreement between ICL and the Registrant dated November 12, 1997.                                                                                                                       
|(m)(s)10.14 |  | Amended and Restated Employment, Confidential Information and Invention Assignment Agreement dated January 1, 1998 between the Registrant and Joseph Rubinfeld.                                                                         
|(f)10.15    |  | Office Building Lease dated June 23, 2000 between the Registrant and Koll Dublin Corporate Center, L.P                                                                                                                                  
|(d)10.16    |  | Purchase and Sale Agreement dated as of September 30, 1996 between the Registrant and Warner-Lambert Company, a Delaware corporation.                                                                                                   
|(e)(q)10.17 |  | Asset Purchase Agreement dated January 15, 1997 between the Registrant and Immunex Corporation, a Washington corporation.                                                                                                               
|(e)10.18    |  | Bishop Ranch Business Park Building Lease dated October 14, 1996 between the Registrant and Annabel Investment Company, a California partnership.                                                                                       
|(g)(q)10.19 |  | License Agreement between Inflazyme Pharmaceuticals Ltd. and the Registrant dated April 11, 1997.                                                                                                                                       
|(g)(q)10.20 |  | Nonexclusive Supply Agreement between the Registrant and Yunnan Hande Technological Development Co. Ltd. dated May 7, 1997.                                                                                                             
|(g)10.21    |  | Assignment and Assumption Agreement between the Registrant and R&S, LLC dated April 17, 1997.                                                                                                                                           
|(h)10.22    |  | Convertible Secured Note, Option and Warrant Purchase Agreement dated June 17, 1997 among the Registrant, Tako Ventures, LLC and, solely as to Sections 5.3 and 5.5 thereof, Lawrence J. Ellison (the "Tako
Purchase Agreement").       
|(r)10.23    |  | Amendment No. 1 to the Tako Purchase Agreement dated March 17, 1999.                                                                                                                                                                    
|(j)10.24    |  | Form of Common Stock Purchase Agreement among the purchasers and the Registrant dated August 29, 1997.                                                                                                                                  
|(j)(q)10.25 |  | License Agreement between Stehlin Foundation for Cancer Research and the Registrant dated September 3, 1997.                                                                                                                            
|(j)10.26    |  | Letter Agreement dated August 13, 1997 between the Registrant and South Bay Construction, Inc.                                                                                                                                          
|(k)(q)10.27 |  | Supply Agreement dated October 20, 1997 between the Registrant and Warner-Lambert Company.                                                                                                                                              
|(l)10.28    |  | Standard Industrial/Commercial Multi-Tenant Lease dated October 13, 1997 between R&S, LLC and Quark Biotech, Inc.                                                                                                                       
|(t)10.29    |  | Registration Rights Agreement dated November 23, 1998.                                                                                                                                                                                  
|(o)10.30    |  | Agreement and Plan of Reorganization by and among the Registrant, Royale Acquisition Corp., and Sparta Pharmaceuticals, Inc. dated January 18, 1999.                                                                                    
|(r)10.31    |  | Stock Purchase Agreement between the Registrant and Tako dated January 29, 1999.                                                                                                                                                        
|(r)10.32    |  | Standard Industrial/Commercial Multi-Tenant Lease dated February 12, 1999 between the Registrant and Sea Cliff Properties, a California general partnership (for the premises at 1075 Serpentine Lane, Pleasanton,
California, Suite A).

42

---

|(r)10.33     |  | Standard Industrial/Commercial Multi-Tenant Lease dated February 12, 1999 between the Registrant and Sea Cliff Properties, a California general partnership (for the premises at 1075 Serpentine Lane, Pleasanton,
California, Suite B).
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(r)10.34     |  | Secured Promissory Note Commitment dated March 25, 1999 issued by the Registrant to Tako Ventures LLC.                                                                                                                                  
|(r)10.35     |  | Common Stock Purchase Warrant dated March 25, 1999.                                                                                                                                                                                     
|(p)(q)10.36  |  | Letter of Intent regarding Nipent Manufacturing.                                                                                                                                                                                        
|(t)10.37     |  | Common Stock Purchase Agreement dated November 23, 1998.                                                                                                                                                                                
|(q)(u)10.38  |  | Know-How Transfer and Cooperation Agreement dated September 10, 1999 between the Registrant and Pharmachemie B.V.                                                                                                                       
|(u)10.39     |  | Agreement to Terminate and Release of Collateral dated September 30, 1999 between the Registrant and Tako Ventures, LLC.                                                                                                                
|(w)10.40     |  | First Amendment to Agreement and Plan of Reorganization by and among the Registrant, Royale Acquisition Corp. and Sparta Pharmaceuticals, Inc. dated May 15, 1999                                                                       
|(x)10.41     |  | Form of Warrant Agreement dated August 12, 1999 between the Registrant and ChaseMellon Shareholder Services (including form of Common Stock Purchase Warrant).                                                                          
|(y)10.42     |  | Amended & Restated Registration Rights Agreement dated September 1, 1999 between the Registrant and SMALLCAP World Fund, Inc.                                                                                                           
|(y)10.43     |  | Purchase Agreement dated September 15, 1999 between the Registrant and The Tail Wind Fund Ltd., Carriage Partners, LLC, and LBI Group Inc.                                                                                              
|(y)10.44     |  | Supplement Agreement dated September 23, 1999 between the Registrant and the Tail Wind Fund, Ltd.                                                                                                                                       
|(y)10.45     |  | Registration Rights Agreement dated September 15, 1999 between the Registrant and The Tail Wind Fund Ltd., Carriage Partners, LLC, and LBI Group Inc.                                                                                   
|(y)10.46     |  | Form of Warrant Agreement between Registrant and Clipperbay & Co.                                                                                                                                                                       
|(y)10.47     |  | Form of Warrant Agreement between Registrant and The Tail Wind Fund Ltd., Carriage Partners, LLC, and LBI Group Inc.                                                                                                                    
|(z)(q)10.48  |  | Common Stock and Option Purchase Agreement, dated December 21, 1999 between the Registrant and Abbott Laboratories                                                                                                                      
|(z)10.49     |  | Form Registration Rights Agreement                                                                                                                                                                                                      
|(z)(q)10.50  |  | Worldwide Sales, Distribution, and Development Agreement, dated December 21, 1999 between the Registrant and Abbott Laboratories                                                                                                        
|(z)(q)10.51  |  | U.S. Distribution Agreement, Dated December 21, 1999 between the Registrant and Abbott Laboratories                                                                                                                                     
|(aa)10.52    |  | Registration Rights Agreement dated December 15, 1999 between the Registrant and AVI BioPharma, Inc.                                                                                                                                    
|(aa)10.53    |  | Subscription Agreement dated December 1, 1999 between the Registrant and AVI BioPharma, Inc.                                                                                                                                            
|(aa)(q)10.54 |  | Research Agreement (Camptothecin) dated November 15, 1999 between the Registrant and Clayton Foundation for Research                                                                                                                    

43

---

|(aa)(q)10.55  |  | Research Agreement (Paclitaxel) dated November 15, 1999 between the Registrant and Clayton Foundation for Research                        
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|(bb)(q)10.56  |  | License Agreement (Camptothecin) dated November 15, 1999 between the Registrant and Research Development Foundation                       
|(bb)(q)10.57  |  | License Agreement (Paclitaxel) dated November 15, 1999 between the Registrant and Research Development Foundation                         
|(ee)(q)10.58  |  | Amendment No. 1 to License Agreement dated November 1, 1999 between the Registrant and the Stehlin Foundation for Cancer Research         
|(ee) 10.59    |  | United States of America Sales, Distribution, and Development Agreement dated April 4, 2000 between the Registrant and AVI BioPharma, Inc.
|(ee) 10.60    |  | Common Stock and Warrant Purchase Agreement dated April 4, 2000 between the Registrant and AVI BioPharma, Inc.                            
|(dd) 10.61    |  | Registration Rights Agreement dated April 4, 2000 between the registrant and AVI BioPharma, Inc.                                          
|(ee) 10.62    |  | Asset Purchase Agreement dated February 18, 2000 between the Registrant and AMUR Pharmaceuticals, Inc.                                    
|(ee) 10.63    |  | Patent and Intellectual Property Assignment Agreement dated September 27, 2000 between the Registrant and AMUR Pharmaceuticals, Inc.      
|(dd) 10.64    |  | Registration Rights Agreement dated September 27, 2000 between the registrant and AMUR Pharmaceuticals, Inc.                              
|(dd) 10.65    |  | Warrant Agreement dated December 23, 1998 between the Registrant and Jesup & Lamont Securities Corporation                                
|(dd) 10.66    |  | Warrant Agreement dated October 4, 1999 between the Registrant and Paulson Investment Company, Inc.                                       
|(gg)(q) 10.67 |  | Supply and Distribution Agreement dated September 21, 2001 between the Registrant and EuroGen Pharmaceuticals Ltd.                        
|(hh) 10.68    |  | Termination and Release Agreement dated March 4, 2002 between the Registrant and Abbott Laboratories                                      
|23.1          |  | Consent of Ernst & Young LLP, Independent Auditors.                                                                                       

---

44

---

45

---



46

---





REPORT OF INDEPENDENT AUDITORS

Board
of Directors and Stockholders
SuperGen, Inc.

We
have audited the accompanying consolidated balance sheets of SuperGen, Inc. as of December 31, 2001 and 2000, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements 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 consolidated financial position of SuperGen, Inc. at December 31,
2001 and 2000 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.



Palo
Alto, California
February 19, 2002
except for Note 6, paragraph 2, as to which the date is
March 4, 2002

F-1

---



SUPERGEN, INC.        CONSOLIDATED BALANCE SHEETS        (in thousands, except share and per share amounts)

|                                       |                                                                                                                                                                                | December 31,                               |       
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------
|
|ASSETS                                 |                                                                                                                                                                               
|Current assets:                        |                                                                                                                                                                                |                                            |       
|                                       | Cash and cash equivalents                                                                                                                                                      |                                            | $     
|                                       | Marketable securities                                                                                                                                                          |                                            |       
|                                       | Accounts receivable                                                                                                                                                            |                                            |       
|                                       | Other receivables                                                                                                                                                              |                                            |       
|                                       | Inventories                                                                                                                                                                    |                                            |       
|                                       | Prepaid expenses and other current assets                                                                                                                                      |                                            |       
|                                       |                                                                                                                                                                                |                                            |       
|                                       |                                                                                                                                                                                | Total current assets                       |       
|Marketable securitiesnon-current      |                                                                                                                                                                                |                                            | 6,164 
|Investment in stock of related parties |                                                                                                                                                                                |                                            | 29,934
|Due from related parties               |                                                                                                                                                                                |                                            | 991   
|Property, plant and equipment, net     |                                                                                                                                                                                |                                            | 6,345 
|Developed technology at cost, net      |                                                                                                                                                                                |                                            | 1,090 
|Goodwill and other intangibles, net    |                                                                                                                                                                                |                                            | 1,157 
|Restricted cash                        |                                                                                                                                                                                |                                            | 3,367 
|Other assets                           |                                                                                                                                                                                |                                            | 34    
|                                       |                                                                                                                                                                                |                                            |       
|                                       |                                                                                                                                                                                | Total assets                               |       
|                                       |                                                                                                                                                                                |                                            |       
|LIABILITIES AND STOCKHOLDERS' EQUITY   |                                                                                                                                                                               
|Current liabilities:                   |                                                                                                                                                                                |                                            |       
|                                       | Accounts payable and accrued liabilities                                                                                                                                       |                                            | $     
|                                       | Payable to AVI BioPharma, Inc                                                                                                                                                  |                                            |       
|                                       | Deferred revenue                                                                                                                                                               |                                            |       
|                                       | Accrued employee benefits                                                                                                                                                      |                                            |       
|                                       |                                                                                                                                                                                |                                            |       
|                                       |                                                                                                                                                                                | Total current liabilities                  |       
|Deferred revenuenon-current           |                                                                                                                                                                                |                                            | 2,167 
|                                       |                                                                                                                                                                                |                                            |       
|                                       |                                                                                                                                                                                | Total liabilities                          |       
|                                       |                                                                                                                                                                                |                                            |       
|Commitments and contingencies          |                                                                                                                                                                                |                                            |       
|Stockholders' equity:                  |                                                                                                                                                                                |                                            |       
|                                       | Preferred stock, $.001 par value; 2,000,000 shares authorized;
none outstanding                                                                                                |                                            |       
|                                       | Common stock, $.001 par value; 150,000,000 shares authorized; 32,821,163 and 33,383,723 shares issued and outstanding at December 31, 2001 and December 31, 2000, respectively |                                            |       
|                                       | Additional paid in capital                                                                                                                                                     |                                            |       
|                                       | Deferred compensation                                                                                                                                                          |                                            |       
|                                       | Accumulated other comprehensive gain (loss)                                                                                                                                    |                                            |       
|                                       | Accumulated deficit                                                                                                                                                            |                                            |       
|                                       |                                                                                                                                                                                |                                            |       
|                                       |                                                                                                                                                                                | Total stockholders' equity                 |       
|                                       |                                                                                                                                                                                |                                            |       
|                                       |                                                                                                                                                                                | Total liabilities and stockholders' equity |       
|                                       |                                                                                                                                                                                |                                            |       

See
accompanying notes to consolidated financial statements

F-2

---

SUPERGEN, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except per share amounts)

|                                                                                 |                                                    | Year ended December 31,  |        
|-------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------ | -------
|
|Revenues:                                                                        |                                                    |                          |        
|                                                                                 | Net sales revenue                                  |                          | $      
|                                                                                 | Other revenue                                      |                          |        
|                                                                                 |                                                    |                          |        
|                                                                                 |                                                    | Total revenue            |        
|Operating expenses:                                                              |                                                    |                          |        
|                                                                                 | Cost of sales                                      |                          |        
|                                                                                 | Research and development                           |                          |        
|                                                                                 | Selling, general, and administrative               |                          |        
|                                                                                 | Acquisition of in-process research and development |                          |        
|                                                                                 |                                                    |                          |        
|                                                                                 |                                                    | Total operating expenses |        
|                                                                                 |                                                    |                          |        
|Loss from operations                                                             |                                                    |                          | (61,188
|Interest income                                                                  |                                                    |                          | 5,622  
|Amortization of loan commitment fee                                              |                                                    |                          |       
|                                                                                 |                                                    |                          |        
|Net loss                                                                         |                                                    | $                        | (55,566
|                                                                                 |                                                    |                          |        
|Basic and diluted net loss per share                                             |                                                    | $                        | (1.69  
|                                                                                 |                                                    |                          |        
|Weighted average shares used in basic and diluted net loss per share calculation |                                                    |                          | 32,925 
|                                                                                 |                                                    |                          |        

See
accompanying notes to consolidated financial statements

F-3

---



SUPERGEN, INC.        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY        (in thousands)

|                              |                                                                                                              | Common Stock                                                             |       |   |    |    |   | Accumulated
Other
Comprehensive
Gain (Loss) |        |   |      |      |  
|----------------------------- | ------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------ | ----- | - | -- | -- | - | ------------------------------------------- | ------ | - | ---- | ---- | -
|
|
|Balances at January 1, 1999   |                                                                                                              | 20,970                                                                   |       | $ | 21 |    | $ | 72,818                                      |        |   |     |      | $
|                              | Comprehensive loss:                                                                                          |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              |                                                                                                              | Net loss                                                                 |       |  |    |    |  |                                             |        |  |      |      | 
|                              |                                                                                                              | Other comprehensive lossChange in unrealized gain (loss) on investments |       |  |    |    |  |                                             |        |  |      |      | 
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              | Comprehensive loss                                                                                           |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              | Issuance of common stock and warrants in connection with private placements, net of offering costs of $2,156 |                                                                          | 2,759 |   |    | 3  |   |                                             | 36,440 |   |      |     |  
|                              | Issuance of common stock for acquisition of in-process research and development and license agreements       |                                                                          | 280   |   |    |   |   |                                             | 5,356  |   |      |     |  
|                              | Issuance of common stock to Clayton Foundation in connection with research agreements                        |                                                                          | 36    |   |    |   |   |                                             | 1,191  |   |      |     |  
|                              | Issuance of common stock to AVI BioPharma, Inc                                                               |                                                                          | 100   |   |    |   |   |                                             | 2,825  |   |      |     |  
|                              | Issuance of common stock and warrants in connection acquisition of Sparta Pharmaceuticals, Inc               |                                                                          | 429   |   |    |   |   |                                             | 9,370  |   |      |     |  
|                              | Issuance of common stock upon exercise of warrants and stock options                                         |                                                                          | 820   |   |    | 1  |   |                                             | 5,489  |   |      |     |  
|                              | Issuance of common stock in connection with employee stock purchase plan                                     |                                                                          | 23    |   |    |   |   |                                             | 227    |   |      |     |  
|                              | Issuance of common stock to Tako Ventures, LLC                                                               |                                                                          | 61    |   |    |   |   |                                             | 379    |   |      |     |  
|                              | Issuance of warrants to Tako Ventures, LLC in connection with promissory note                                |                                                                          |      |   |    |   |   |                                             | 2,000  |   |      |     |  
|                              | Compensation expense from stock option grants to consultants and vendors                                     |                                                                          |      |   |    |   |   |                                             | 1,419  |   |      |     |  
|                              | Deferred compensation                                                                                        |                                                                          |      |   |    |   |   |                                             | 947    |   |      | (947 | )
|                              | Amortization of deferred compensation                                                                        |                                                                          |      |   |    |   |   |                                             |       |   |      | 112  |  
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|Balances at December 31, 1999 |                                                                                                              | 25,478                                                                   |       |   | 25 |    |   | 138,461                                     |        |   | (835 | )    |  
|                              | Comprehensive loss:                                                                                          |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              |                                                                                                              | Net loss                                                                 |       |  |    |    |  |                                             |        |  |      |      | 
|                              |                                                                                                              | Other comprehensive lossChange in unrealized gain (loss) on investments |       |  |    |    |  |                                             |        |  |      |      | 
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              | Comprehensive loss                                                                                           |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              | Issuance of common stock in connection with follow-on public offering, net of offering costs of $606         |                                                                          | 1,465 |   |    | 1  |   |                                             | 61,303 |   |      |     |  
|                              | Issuance of common stock upon exercise of warrants and stock options                                         |                                                                          | 5,239 |   |    | 5  |   |                                             | 48,823 |   |      |     |  
|                              | Issuance of common stock to Abbott Laboratories                                                              |                                                                          | 933   |   |    | 1  |   |                                             | 26,499 |   |      |     |  
|                              | Issuance of common stock to AVI BioPharma, Inc., net of offering costs of $45                                |                                                                          | 348   |   |    | 1  |   |                                             | 12,128 |   |      |     |  
|                              | Issuance of common stock for acquisition of in-process research and development                              |                                                                          | 38    |   |    |   |   |                                             | 1,460  |   |      |     |  
|                              | Issuance of common stock to Clayton Foundation in connection with research agreements                        |                                                                          | 47    |   |    |   |   |                                             | 740    |   |      |     |  
|                              | Issuance of common stock in connection with employee stock purchase plan                                     |                                                                          | 21    |   |    |   |   |                                             | 410    |   |      |     |  
|                              | Compensation expense from stock option grants to consultants and vendors                                     |                                                                          |      |   |    |   |   |                                             | 657    |   |      |     |  
|                              | Amortization of deferred compensation                                                                        |                                                                          |      |   |    |   |   |                                             |       |   |      | 230  |  
|                              | Reversal of deferred compensation due to employee termination                                                |                                                                          |      |   |    |   |   |                                             | (408   | ) |      | 408  |  
|                              | Repurchase of common stock                                                                                   |                                                                          | (185  | ) |    |   |   |                                             | (2,396 | ) |      |     |  
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|Balances at December 31, 2000 |                                                                                                              | 33,384                                                                   |       |   | 33 |    |   | 287,677                                     |        |   | (197 | )    |  
|                              | Comprehensive loss:                                                                                          |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              |                                                                                                              | Net loss                                                                 |       |  |    |    |  |                                             |        |  |      |      | 
|                              |                                                                                                              | Other comprehensive lossChange in unrealized gain (loss) on investments |       |  |    |    |  |                                             |        |  |      |      | 
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              | Comprehensive loss                                                                                           |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|                              | Issuance of common stock upon exercise of warrants and stock options                                         |                                                                          | 158   |   |    |   |   |                                             | 1,428  |   |      |     |  
|                              | Issuance of common stock to Abbott Laboratories                                                              |                                                                          | 182   |   |    | 1  |   |                                             | 2,499  |   |      |     |  
|                              | Issuance of common stock to Clayton Foundation in connection with research agreements                        |                                                                          | 21    |   |    |   |   |                                             | 369    |   |      |     |  
|                              | Issuance of common stock in connection with employee stock purchase plan                                     |                                                                          | 39    |   |    |   |   |                                             | 368    |   |      |     |  
|                              | Compensation expense from stock option grants to consultants and vendors                                     |                                                                          |      |   |    |   |   |                                             | 890    |   |      |     |  
|                              | Amortization of deferred compensation                                                                        |                                                                          |      |   |    |   |   |                                             |       |   |      | 75   |  
|                              | Repurchase of common stock                                                                                   |                                                                          | (963  | ) |    | (1 | ) |                                             | (9,116 | ) |      |     |  
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  
|Balances at December 31, 2001 |                                                                                                              | 32,821                                                                   |       | $ | 33 |    | $ | 284,115                                     |        | $ | (122 | )    | $
|                              |                                                                                                              |                                                                          |       |   |    |    |   |                                             |        |   |      |      |  

See accompanying notes to consolidated financial statements

F-4

---



SUPERGEN, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)

|                                                     |                                                                             | Year ended December 31,                                                        |                                       
|---------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------
|
|Operating activities:                                |                                                                             |                                                                                |                                       
|                                                     | Net loss                                                                    |                                                                                | $                                     
|                                                     | Adjustments to reconcile net loss to net cash used in operating activities: |                                                                                |                                       
|                                                     |                                                                             | Depreciation                                                                   |                                       
|                                                     |                                                                             | Amortization of intangible assets                                              |                                       
|                                                     |                                                                             | Amortization of deferred compensation                                          |                                       
|                                                     |                                                                             | Amortization of deferred revenue                                               |                                       
|                                                     |                                                                             | Loss on sale or disposal of property and equipment                             |                                       
|                                                     |                                                                             | Amortization of loan commitment fee                                            |                                       
|                                                     |                                                                             | Expense related to stock options and warrants granted to non-employees         |                                       
|                                                     |                                                                             | Non-cash charges related to acquisition of in-process research and development |                                       
|                                                     |                                                                             | Non-cash charges related to acquisition of license agreements                  |                                       
|                                                     |                                                                             | Changes in operating assets and liabilities:                                   |                                       
|                                                     |                                                                             |                                                                                | Accounts receivable                   
|                                                     |                                                                             |                                                                                | Inventories                           
|                                                     |                                                                             |                                                                                | Prepaid expenses and other assets     
|                                                     |                                                                             |                                                                                | Due from related parties              
|                                                     |                                                                             |                                                                                | Other receivables                     
|                                                     |                                                                             |                                                                                | Restricted cash                       
|                                                     |                                                                             |                                                                                | Accounts payable and other liabilities
|                                                     |                                                                             |                                                                                |                                       
|Net cash used in operating activities                |                                                                             |                                                                                | (49,835                               
|Investing activities:                                |                                                                             |                                                                                |                                       
|                                                     | Purchases of marketable securities                                          |                                                                                |                                       
|                                                     | Sales or maturities of marketable securities                                |                                                                                |                                       
|                                                     | Purchase of equity investments                                              |                                                                                |                                       
|                                                     | Purchase of property and equipment                                          |                                                                                |                                       
|                                                     | Acquisition of Sparta Pharmaceuticals, net of cash acquired                 |                                                                                |                                       
|                                                     |                                                                             |                                                                                |                                       
|Net cash provided by (used in) investing activities  |                                                                             |                                                                                | 1,575                                 
|Financing activities:                                |                                                                             |                                                                                |                                       
|                                                     | Issuance of common stock, net of issuance costs                             |                                                                                |                                       
|                                                     | Repurchase of common stock                                                  |                                                                                |                                       
|                                                     |                                                                             |                                                                                |                                       
|Net cash provided by (used in) financing activities  |                                                                             |                                                                                | (4,821                                
|                                                     |                                                                             |                                                                                |                                       
|Net increase (decrease) in cash and cash equivalents |                                                                             |                                                                                | (53,081                               
|Cash and cash equivalents at beginning of period     |                                                                             |                                                                                | 70,731                                
|                                                     |                                                                             |                                                                                |                                       
|Cash and cash equivalents at end of period           |                                                                             | $                                                                              | 17,650                                
|                                                     |                                                                             |                                                                                |                                       
|Supplemental Disclosures of Cash Flow Information:   |                                                                             |                                                                                |                                       
|                                                     | Non-cash investing and financing activities:                                |                                                                                |                                       
|                                                     |                                                                             | Issuance of common stock related to acquisition of developed technology        |                                       
|                                                     |                                                                             | Issuance of common stock related to research agreement                         |                                       
|                                                     |                                                                             | Issuance of common stock related to equity investment in related party         |                                       

See
accompanying notes to consolidated financial statements

F-5

---



SUPERGEN, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

Description of Business

SuperGen, Inc. ("SuperGen", "we", "us" or the "Company") was incorporated in California in March 1991. We changed our state of incorporation to
Delaware in 1997. We are an emerging pharmaceutical company dedicated to the acquisition, rapid development and commercialization of oncology therapies for solid tumors and hematological malignancies.
We operate in one industry segment.

Principles of Consolidation

Our consolidated financial statements include the accounts of Sparta Pharmaceuticals, Inc. ("Sparta") from August 12, 1999, the date of acquisition,
and two wholly-owned subsidiaries, which are immaterial.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

Our net sales relate principally to two pharmaceutical products. We recognize sales revenue upon shipment and related transfer of title to customers, with
allowances provided for estimated returns and exchanges. Cash advance payments received in connection with distribution agreements or research grants are deferred and recognized ratably over the
period of the respective agreements.

Our
principal customers are clinics, hospitals and hospital buying groups in the United States and drug distributors and wholesalers in the United States and Europe. We do not require
collateral from our customers.

Advertising Expense

Advertising costs are expensed as incurred. We incurred advertising costs of $593,000 in 2001, $806,000 in 2000, and $731,000 in 1999.

Research and Development

Research and development expenditures, including direct and allocated expenses, are charged to expense as incurred. These expenditures include salaries and
employee-related expenses; fees paid to physicians, hospitals, or other research institutions for clinical and pre-clinical studies; fees paid to outside contractors for monitoring of
clinical sites or collection and analysis of data; costs associated with the research and manufacture of clinical drug supplies; and payments made under technology license agreements prior to
regulatory approval of drug candidates.

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents include bank demand deposits, certificates of deposit, marketable securities with maturities of three months or less when purchased and
money market funds which invest

F-6

---

primarily in U.S. government obligations and commercial paper. These instruments are highly liquid and are subject to insignificant market risk.

Marketable
securities consist of corporate or government debt securities and equity securities that have a readily ascertainable market value and are readily marketable. These
investments are reported at fair value. All marketable securities are designated as available-for-sale, with unrealized gains and losses included in accumulated other
comprehensive gain/loss in equity. A decline in the market value of a security below its cost that is deemed to be other than temporary is charged to earnings, and would result in the establishment of
a new cost basis for the security.

Equity Investments

Equity investments in securities without readily determinable fair value are carried at cost. We periodically review those carried at cost and evaluate whether an
impairment has occurred. We believe the amounts continue to be realizable.

Inventories

Inventories are stated at the lower of cost (using the first-in, first-out method) or market value. Inventories were as follows at
December 31 (in thousands):

2001

2000Raw materials

$
176

$
176Work in process


960


720Finished goods


697


752$
1,833

$
1,648


Bulk
materials for our primary pharmaceutical product must be purified at a United States Food and Drug Administration ("FDA") approved facility that meets stringent Good
Manufacturing Practices standards. We currently use a single vendor to perform this manufacturing process using our own equipment located at the vendor's site. The vendor that had been performing the
manufacturing of Nipent filed for bankruptcy in mid-2001. We transferred our manufacturing equipment from that vendor's site to another vendor that is now performing the manufacturing. We
have contracted with a separate vendor to manufacture the Nipent finished dosage at its approved facility. In addition, we store the majority of our bulk raw materials at a single storage location.
Although there are a limited number of vendors who may be qualified to perform these services, we believe that other vendors could be engaged to provide similar services on comparable terms. However,
the time required to locate and qualify other vendors or replace lost bulk inventory could cause a delay in manufacturing that might be financially and operationally disruptive.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation of building, office and manufacturing equipment and furniture and fixtures is provided on a
straight-line basis over the estimated original useful lives of the respective assets, which range from 3 to 31 years. Prior to 2001, manufacturing equipment was amortized to cost
of sales on a units-manufactured basis expected to

F-7

---

approximate six years. Leasehold improvements are amortized over the shorter of the life of the lease or their estimated useful lives using the straight-line method.

Property,
plant and equipment consist of the following at December 31 (in thousands):

2001

2000Land and building

$
2,433

$
2,433Leasehold improvements


2,564


1,566Equipment


816


741Furniture and fixtures


3,275


2,605Total property and equipment


9,088


7,345Less accumulated depreciation and amortization


(2,743
)

(1,907
)Property, plant and equipment, net

$
6,345

$
5,438


Developed Technology

Developed technology related to the acquisition of Nipent is being amortized to cost of sales on a units-manufactured basis over a period expected to approximate
six years. Developed technology related to other acquired products is being amortized on a straight-line basis over five years. Accumulated amortization was $846,000 and $672,000 at
December 31, 2001 and 2000, respectively.

Intangible Assets

Intangible assets, including trademarks, covenants not to compete, acquired workforce and customer lists, are stated at cost and amortized on a
straight-line basis over their estimated useful lives of six months to five years. Goodwill, which represents the excess of acquisition cost over the net assets acquired, is being
amortized on a straight-line basis over five years. As of December 31, 2001 and 2000, accumulated amortization was $999,000 and $630,000, respectively.

Major Customers

Our major customers include a number of buying groups. The percentage of sales of each of these major customers to total net sales for the years ended
December 31 were as follows:

2001

2000

1999Customer A

23
%
25
%
15
%Customer B

12

6

8Customer C

11



Customer D

10

21

8Pfizer (Warner-Lambert Company)

3



27Customer E

1

12

7All others

40

36

35Total

100
%
100
%
100
%


F-8

---

Net Loss per Common Share

Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during the year.

As
we have reported operating losses each period since our inception, the effect of assuming the exercise of options and warrants would be anti-dilutive and, therefore, basic
and diluted loss per share are the same. The anti-dilutive securities that we have omitted from the calculation of basic net loss per common share are disclosed in Notes 3 and 4.

Stock-Based Compensation

We grant stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of the grant. We account
for stock option grants in accordance with APB Opinion No. 25,Accounting for Stock Issued to Employees("APB 25") and related
Interpretations because the alternative fair value accounting provided under FASB Statement No. 123,Accounting for Stock-Based Compensation("FAS 123") requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of our employee stock
options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.

For
stock-based compensation arrangements to non-employees, we apply the Black-Scholes fair value approach. The equity awards to non-employees are subject to
re-measurement over their vesting terms and the resulting value is recognized as expense over the period of services received.

Impairment of Long-lived Assets

In accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of ("FAS 121"), we review long-lived assets, including property and equipment and goodwill, for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Under FAS 121, an impairment loss would be recognized when estimated undiscounted future
cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Impairment, if any, is assessed using discounted cash flows. Through
December 31, 2001, there have been no such losses.

Recent Accounting Pronouncements

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires that all business combinations be accounted for by the purchase method of accounting and changes the criteria for
recognition of intangible assets acquired in a business combination. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. We do not expect that
the adoption of SFAS 141 will have a material effect on our financial position or results of operations. SFAS 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized; however, these assets must be reviewed at least annually for impairment. Intangible assets with finite useful lives will continue to be amortized over their respective
useful lives. The standard also establishes specific guidance for testing for impairment of goodwill and

F-9

---

intangible assets with indefinite useful lives. The provisions of SFAS 142 will be effective for our fiscal year 2002. At December 31, 2001, we had approximately $730,000 in goodwill
that will no longer be subject to amortization.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 144 amends existing accounting guidance on asset impairment and provides a single accounting model for long-lived assets to be disposed of. Among other
provisions, the new rules change the criteria for classifying an asset as held-for-sale. The standard also broadens the scope of businesses to be disposed of that qualify for
reporting as discontinued operations, and changes the timing of recognizing losses on such operations. The provisions of SFAS 144 will be effective for our fiscal year 2002. We do not expect
that the adoption of SFAS 144 will have a material effect on our financial statements.

2.    Available-for-Sale-Securities

The following is a summary of available-for-sale securities (in thousands):

Amortized
Cost

Unrealized
Gains
(Losses)

Fair ValueAt December 31, 2001:U.S. corporate debt securities

$
68,363

$
527

$
68,890Foreign corporate debt securities


1,410


(11
)

1,399U.S. government debt securities


459


3


462Marketable equity securities


22,919


6,980


29,899Total

$
93,151

$
7,499

$
100,650At December 31, 2000:U.S. corporate debt securities

$
124,054

$
349

$
124,403U.S. government debt securities


3,848


7


3,855Marketable equity securities


22,666


(9,763
)

12,903Total

$
150,568

$
(9,407
)
$
141,161


Balance
sheet classification:

At December 31, 2001:Amounts included in cash and cash equivalents

$
15,023

$


$
15,023Marketable securities, current


49,708


470


50,178Investment in stock of related parties


22,499


6,786


29,285Marketable securities, non-current


5,921


243


6,164Total

$
93,151

$
7,499

$
100,650At December 31, 2000:Amounts included in cash and cash equivalents

$
68,553

$
(14
)
$
68,539Marketable securities, current


21,024


20


21,044Investment in stock of related parties


22,499


(9,749
)

12,750Marketable securities, non-current


38,492


336


38,828Total

$
150,568

$
(9,407
)
$
141,161


F-10

---

Available-for-sale
securities at December 31, by contractual maturity, are shown below (in thousands):

Fair Value2001

2000Debt securitiesDue in one year or less

$
65,201

$
89,583Due after one year through three years


5,550


38,67570,751


128,258Marketable equity securities


29,899


12,903Total

$
100,650

$
141,161


Realized
gains and losses on the sale of available-for-sale securities for the years ended December 31, 2001, 2000, and 1999 were not
material.

3.    Stockholders' Equity

Follow-On Offering of Common Stock

In March 2000, we concluded a public follow-on offering of our common stock. We issued 1,465,000 shares of registered stock, resulting in net
proceeds to the Company of approximately $61,300,000.

Private Placements

In September 1999, we issued 561,000 shares of unregistered common stock to an institutional investor. As part of this transaction we also issued to the
investor three-year warrants to purchase 336,600 shares of our common stock at a price of $20.00 per share. As partial compensation to the placement agent, we issued 30,855
five-year warrants to purchase unregistered common stock at $20.00 per share. After
deducting $500,000 in commissions and fees from the gross proceeds of $9,099,000, the net proceeds from this transaction totaled $8,599,000.

In
September 1999, we issued 469,819 shares of unregistered common stock to a group of institutional investors. As part of this transaction we also issued to the investors
three-year warrants to purchase 140,946 shares of our common stock at a price of $22.50 per share. Additionally, the investors were issued two-year warrants to purchase an
aggregate of 140,946 shares of our common stock, with 46,981, 46,981 and 46,984 warrants having exercise prices of $30, $45 and $60 per share, respectively. As partial compensation to the placement
agent, we issued five-year warrants to purchase 26,161 shares of our common stock at $22.075 per share. After deducting $495,000 in commissions and fees from the gross proceeds of
$8,250,000, the net proceeds from this transaction totaled $7,755,000.

F-11

---

In September 1999, we issued 64,243 shares of unregistered common stock to an institutional investor. As part of this transaction we also issued three-year warrants to
purchase 19,273 shares of our common stock at a price of $22.1875 per share. Additionally, the investor was issued two-year warrants to purchase an aggregate of 19,273 shares of our common
stock, with 6,244, 6,244 and 6,245 warrants having exercise prices of $30, $45 and $60 per share, respectively. As partial compensation to the placement agent, we issued five-year warrants
to purchase 3,975 shares of our common stock at $22.01 per share. After deducting $75,000 in commissions and fees from the gross proceeds of $1,250,000, the net proceeds from this transaction totaled
$1,175,000.

In
August 1999, we issued 463,600 shares of registered common stock to an institutional investor. As part of this transaction we also issued to the investor three-year
warrants to purchase 231,800 shares of common stock at a price of $18.00 per share and granted registration rights in connection with these warrants. As partial compensation to the placement agent, we
issued 25,498 five-year warrants to purchase unregistered common stock at $18.00 per share. After deducting $414,000 in commissions and fees from the gross proceeds of $7,520,000, the net
proceeds from this transaction totaled $7,106,000.

In
May 1999, we issued 1,000,000 shares of registered common stock to an institutional investor, for net proceeds totaling $9,728,000. In June 1999, we issued 200,000
shares of registered common stock to two institutional investors. The net proceeds from these two institutional investors totaled $2,080,000.

The
stock issuance transactions noted above reflected discounts to the market price of our stock at the transaction dates. These discounts resulted from prior discussions with the
investors and the selling prices per share were based on a negotiated average market price. We believe that the selling prices were reasonable in light of the volatility of our stock price, the
magnitude of the transactions, and our capital needs.

In
June 1997, we entered into an agreement with Tako Ventures, LLC ("Tako"), an investment entity controlled by Lawrence J. Ellison, Founder and Chairman of Oracle
Corporation, for a private placement of our common stock and issuance of warrants. This agreement contains provisions regarding sales or issuances of stock below a set minimum price during a specified
time period. Sales or issuances of stock below the set minimum price will result in adjustments to the exercise price of the Tako warrants and the issuance of additional shares of common stock, at no
cost, to Tako. As the sales price of the shares sold in a December 1998 private placement was below the minimum price, we issued an additional 107,333 shares in 1999 to Tako and reduced the
warrant exercise price for 230,000 shares from $13.50 to $10.35.

The
stock purchase agreement with Tako also gave Tako certain rights to participate in future sales of common stock at comparable terms and conditions. In January 1999, Tako
exercised its rights and purchased 61,350 shares of unregistered common stock for a purchase price of $379,000, net of fees. Tako was granted registration rights in connection with this transaction.

Stock Repurchase Plan

In September 2000, the SuperGen Board of Directors authorized a stock repurchase plan to acquire, in the open market, an aggregate of up to 1,000,000
shares of our common stock, at prices not to exceed $22.00 per share or $20,000,000 in total. In March 2001, the Board authorized the repurchase of an additional 1,000,000 shares, but
maintained the $20,000,000 repurchase total. During the year

F-12

---

ended December 31, 2001, we repurchased 963,000 shares of our common stock at a cost, net of commissions, of $9,117,000. During the year ended December 31, 2000, we repurchased 184,500
shares of our common stock at a cost, net of commissions, of $2,396,000. All shares repurchased have been retired.

Warrants

At December 31, 2001, warrants to purchase the following shares of our common stock were outstanding:

Number of
Shares

Exercise
Price

Issue
Date

Expiration
Date1,045,000

$
13.50

1997

2007230,000


10.35

1997

2007200,000


10.47

2001

2004500,000


11.00

1998

2004706,142


18.00 - 22.50

1999

2002 - 2004200,000


40.00

2000

20026,372


55.05 - 57.35

1999

20023,816


90.12 - 655.31

1999

20022,891,330


In
March 2001, we entered into agreements with a consultant to perform certain financial consulting and public relations services. In connection with these agreements, we issued
the consultant a three-year warrant to purchase 200,000 shares of unregistered common stock at an exercise price of $10.47. We calculated the value of the warrant at $758,000 using the
Black-Scholes valuation model, utilizing an expected volatility of 0.762, risk-free interest rate of 5.88%, and expected life of three years. The value of our stock at the date of grant
was $8.09. The warrants became fully vested in September 2001, and the value of $758,000 was charged to Selling, general and administrative expense in 2001.

Stock Reserved for Future Issuance

At December 31, 2001 we have reserved shares of common stock for future issuance as follows:

Stock options outstanding

3,705,962Stock options available for grant

1,278,841Warrants to purchase common stock

2,891,330Shares available for Employee Stock Purchase Plan

200,3848,076,517


4.    Stock Option Plans

We have 6,763,000 shares of common stock authorized for issuance upon the grant of incentive stock options or nonstatutory stock options to employees, directors,
and consultants under our stock option plans. The number of shares to be purchased, their price, and the terms of payment are

F-13

---

determined by the Company's Board of Directors, provided that the exercise price for incentive stock options cannot be less than the fair market value on the date of grant. The options granted
generally expire ten years after the date of grant and become exercisable at such times and under such conditions as determined by the Board of Directors (generally over a four or five year period).

A
summary of the Company's stock option activity and related information follows:

|                                   |  | Options Outstanding
|---------------------------------- |  | -------------------
|
|Balance at January 1, 1999         |  | 3,232,176          
|Granted at fair value              |  | 657,353            
|Granted at less than fair value    |  | 124,000            
|Exercised                          |  | (557,233           
|Forfeited                          |  | (96,333            
|                                   |  |                    
|Balance at December 31, 1999       |  | 3,359,963          
|Granted at fair value              |  | 971,320            
|Exercised                          |  | (710,742           
|Forfeited                          |  | (330,396           
|                                   |  |                    
|Balance at December 31, 2000       |  | 3,290,145          
|Granted at fair value              |  | 688,450            
|Granted at greater than fair value |  | 24,000             
|Exercised                          |  | (141,533           
|Forfeited                          |  | (155,100           
|                                   |  |                    
|Balance at December 31, 2001       |  | 3,705,962          
|                                   |  |                    

Information
concerning the options outstanding at December 31, 2001 is as follows:

|                 |  | Options outstanding |  | Options exercisable
|---------------- |  | ------------------- |  | -------------------
|
|$0.135 to $5.88  |  | 421,521             |  | $                  
|6.00 to 7.44     |  | 763,686             |  |                    
|7.50 to 11.75    |  | 758,772             |  |                    
|11.81 to 14.94   |  | 618,539             |  |                    
|15.00 to 22.63   |  | 620,913             |  |                    
|23.63 to 68.00   |  | 522,531             |  |                    
|                 |  |                     |  |                    
|$0.135 to $68.00 |  | 3,705,962           |  | $                  
|                 |  |                     |  |                    

Pro
forma information regarding net loss and net loss per share is required by FAS 123. We calculated this pro-forma information using the fair value method of
accounting for employee stock

F-14

---

options under that Statement. We estimated the fair value for these options at the date of grant using the Black-Scholes option valuation model with the following assumptions:

Years ended December 31,2001

2000

1999Risk-free interest rate

5.48
%
5.90
%
5.34
%Dividend yield





Expected volatility

0.8

0.8

0.7Expected life (in years)

5.0

5.0

4.9


The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting requirements and are fully transferable. Employee stock
options have characteristics significantly different than those of traded options. In addition, option valuation models require the input of highly subjective assumptions including the expected stock
price volatility and changes in the subjective input assumptions can materially affect the estimate of fair value of an employee stock option. Therefore, in our opinion, existing option valuation
models do not necessarily provide a reliable single measure of the fair value of our employee stock options.

For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:

|                                               |  | Years ended December 31, |        
|---------------------------------------------- |  | ------------------------ | -------
|
|Pro forma net loss (in thousands)              |  | $                        | (60,424
|Pro forma basic and diluted net loss per share |  |                          | (1.84  

During
the year ended December 31, 1999, in connection with the grant of certain stock options to employees and officers, we recorded deferred stock compensation for financial
statement reporting purposes of $947,000, representing the difference between the exercise price and the deemed fair value of our common stock for financial reporting purposes on the date the stock
options were granted. Deferred compensation is included as a component of stockholders' equity and is being amortized to expense on a straight line basis over four years, the vesting period of the
options. During the years ended December 31, 2001, 2000 and 1999, we recorded amortization of deferred stock compensation expense of $75,000, $230,000 and $112,000, respectively. During the
year ended December 31, 2000, we reversed $408,000 of deferred compensation, representing the value of unvested stock options forfeited upon the departure of an officer of the Company.

5.    Acquisition Activity

Peregrine PharmaceuticalsVEGF License

In February 2001, we completed a transaction to license a platform drug-targeting technology known as Vascular Targeting Agent ("VTA") from
Peregrine Pharmaceuticals, formerly known as Techniclone Corp. The licensed technology is specifically related to Vascular Endothelial Growth Factor ("VEGF"). The agreement required an
up-front payment of $600,000, which included the acquisition of 150,000 shares of Peregrine common stock valued at $253,000. These shares are carried as part of

F-15

---

Marketable Securitiesnon-current. The remaining $347,000 of the payment was recorded to research and development expense.

The
terms of the agreement require that we pay milestone payments and royalties to Peregrine based on the net revenues of any drugs commercialized using the VEGF technology. These
payments could ultimately total $8 million. No amounts have been paid under the agreement to date. In addition, we are required to pay Peregrine an annual license fee of $200,000 per year until
the first filing of an IND utilizing the licensed patents.

AMUR Pharmaceuticals, Inc. Intellectual Property

In September 2000, we acquired all of the intellectual property of AMUR Pharmaceuticals, Inc. ("Amur") in exchange for 37,795 shares of our common
stock and two-year warrants to purchase 200,000 shares of our common stock at $40.00 per share. Amur's proprietary technology is based on a new water-soluble class of hormones.
Investigation of these hormones determined that a specific portion, phosphocholine, confers water solubility to the hormones. Amur's previously conducted research and development has shown that
phosphocholine may be attached to other compatible molecules representing a novel patented drug delivery technology.

Research
using this technology had commenced but required extensive pre-clinical development and had not fully demonstrated its technological feasibility. Accordingly, we
recorded a charge of $1,585,000 to acquired in process research and development ("IPR&D") in September 2000.

Clayton Foundation for ResearchInhaled Drugs

In December 1999, we entered into a licensing and research agreement with the Clayton Foundation for Research and its technology transfer organization,
Research Development Foundation. Under the terms of the licensing agreement, we acquired worldwide rights to inhaled versions of formulations of camptothecins, including Orathecin, and
taxanes, including paclitaxel (Taxol®). The license rights were acquired for 28,799 shares of common stock with an aggregate value of $916,000, which we charged to research and development
in 1999. The license agreement contained certain guarantees related to the price of our stock issued in the acquisition. In January 2001, since the value of our stock had declined, we issued
the Research Development Foundation an additional 21,210 shares of our stock. These shares were valued at $369,000, which we charged to research and development expense in 2001.

The
Clayton Foundation agreed to perform the research in exchange for 36,130 shares of common stock, which we valued at $1,191,000. As the research had not started at December 31,
1999, the total was included in prepaid expenses and other assets at that date. The amount was charged to research and development expense in 2000. In December 2000, we issued an additional
46,613 shares of common stock to the Clayton Foundation in connection with the second year of research. These shares were valued at $740,000 and the total was included in prepaid expenses at
December 31, 2000, and charged to research and development in 2001.

Decitabine

In September 1999, we acquired the worldwide rights to decitabine, a chemotherapeutic agent owned by Pharmachemie B.V., a subsidiary of Teva
Pharmaceuticals. Decitabine, which has received

F-16

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orphan drug status from the FDA, is currently in clinical testing for acute leukemias and other hematological malignancies. Each year, over 50,000 new cases of acute leukemias and hematological
malignancies are reported in the United States. The FDA has not granted marketing approval to use decitabine for the treatment of any disease.

The
acquisition involved an exchange of 171,123 shares of unregistered SuperGen common stock valued at $3,400,000, which we charged to IPR&D. In assigning the purchase price to IPR&D, we
considered, among other factors, our intentions for the future use of the acquired project, its stage of completion, the lack of alternative future uses of the technology, and that no other tangible
or intangible assets were acquired.

Sparta Pharmaceuticals, Inc.

In August 1999, we completed our acquisition of Sparta Pharmaceuticals, Inc., a biopharmaceutical company engaged in developing technologies and
drugs for the treatment of a number of life-threatening diseases, including cancer, cardiovascular disorders, chronic metabolic diseases, and inflammation.

On
the effective date of the merger Sparta became a wholly-owned subsidiary of SuperGen. We issued 429,082 shares of our common stock, with a fair value of $7,800,000, and 220,945 common
stock warrants, with a fair value of $1,558,000, to former Sparta stockholders. We assumed approximately 2.9 million options and warrants to purchase Sparta common stock and converted such
options to SuperGen options and warrants to acquire approximately 110,600 shares of SuperGen common stock. The $12,000 value of the options assumed was included in the purchase price and as a
component of stockholders' equity in the consolidated financial statements. Additionally, we recorded transaction related costs of approximately $262,000, which when aggregated with the above
consideration brought the total cost of the acquisition to $9,632,000.

The
acquisition was accounted for by the purchase method of accounting and, accordingly, the results of operations of Sparta for the period from August 1999 are included in the
accompanying consolidated financial statements. Assets acquired and liabilities assumed were recorded at their estimated fair
values. Approximately $7,450,000 of the purchase price was allocated to acquired IPR&D. The Sparta research and development programs currently in process were valued as follows:

5-FP

$
3,430,000PZG


1,380,000Partaject drug delivery method


2,640,000$
7,450,000


We
recorded this acquired IPR&D to expense at the date of acquisition.

The
allocation of the purchase price for Sparta resulted in goodwill of approximately $1.4 million and intangibles and work force value of $500,000. Goodwill and intangibles are
being amortized over five years. The work force value was amortized over six months.

The
following unaudited pro forma financial summary is presented as if the operations of the Company and Sparta were combined as of January 1, 1999. The unaudited pro forma
combined results are not necessarily indicative of the actual results that would have occurred had the acquisition been

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consummated at that date, or of the future operations of the combined entities. Nonrecurring charges, such as the acquired in-process research and development charge of $7,450,000 are not
reflected in the following pro forma financial summary:

Pro forma financial summary

Year ended
December 31, 1999(unaudited)
(in thousands, except
per share amounts)Net sales

$
5,032Net loss


(31,514
)Basic and diluted net loss per share

$
(1.35
)


Surface Safe Product Line Acquisition

In July 1999, we acquired the Surface Safe product line from Aldorr, Inc., a medical technology development company. Surface Safe is a
two-step towelette disposable cleaning system used to decontaminate work surfaces where chemotherapeutic preparation is conducted. Aldorr assigned us patents and trademarks related to the
Surface Safe product line and granted us an irrevocable, exclusive, worldwide, perpetual and royalty-free license to use the licensed know-how and any other intellectual
property owned or licensed by Aldorr related to the Surface Safe product line. Aldorr has agreed not to compete with us in this marketplace for a period of five years. We also obtained a customer list
from Aldorr, Inc. The aggregate value of the 79,546 shares of our unregistered common stock paid to Aldorr, Inc. was estimated to be $1,040,000, and was allocated to the covenant not to
compete, the customer list, trademark, and the developed technology based on estimated fair values on the acquisition date. The recorded assets are being amortized over five years.

Orathecin (rubitecan)

In September 1997, we acquired exclusive worldwide rights to a patented anticancer compound, Orathecin, (generic name rubitecan, also formerly known as
RFS2000 or 9-NC), from the Stehlin Foundation for Cancer Research ("Stehlin"). We also agreed to make monthly cash payments to Stehlin of $100,000 until the earlier of the date of FDA
marketing approval of Orathecin or four years. Our agreement with Stehlin also calls for additional payments in SuperGen common stock upon the achievement of specified milestones and royalties on any
product sales.

In
November 1999, we amended our agreement with Stehlin to broaden the definition of licensed compounds to include certain analogues of Orathecin. Under this amendment, we
increased our monthly cash payments to $200,000 for 2000 and 2001 and are required to seek commercial applications for Orathecin. We are required to pay the Stehlin Foundation approximately
$10 million for
research and must make cash royalty payments and cash or stock milestone payments to the Stehlin Foundation as we develop and commercialize Orathecin. In accordance with these agreements, we paid
Stehlin $2,400,000 in 2001, $2,400,000 in 2000, and $1,200,000 in 1999.

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6.    Agreements with Abbott Laboratories

In December 1999, we entered into two agreements with Abbott Laboratories ("Abbott"), a Common Stock and Option Purchase Agreement and a Worldwide Sales,
Distribution and Development Agreement relating to Orathecin. Under these agreements, Abbott was to invest in shares of our common stock and would participate with us in the marketing and distribution
of Orathecin. We would have co-promoted Orathecin with Abbott in the United States and Abbott had exclusive rights to market Orathecin outside of the United States. In the United States
market, we would have shared profits from product sales equally with Abbott, while outside of the United States market, Abbott would have paid us royalties and transfers fees based on product sales.
Abbott was obligated to purchase up to $81.5 million in shares of our common stock over a period of time. In addition, Abbott had an option to purchase up to 49% of the shares of our common
stock outstanding at the time of the exercise at $85 per share. Abbott also had a right of first discussion with respect to our product portfolio and a right of first refusal to acquire us. In
connection with these agreements, Abbott made a $26.5 million equity investment in January 2000 and a $2.5 million equity milestone payment in July 2001.

On
March 4, 2002, SuperGen and Abbott mutually terminated the Common Stock and Option Purchase Agreement and the Worldwide Sales, Distribution and Development Agreement. We
regained all marketing rights to Orathecin worldwide and are no longer obligated to share profits from product sales of Orathecin. Abbott no longer has the right or obligation to purchase the
remaining aggregate amount of $52.5 million of shares of our common stock, no longer has the option to purchase up to 49% of our outstanding shares, no longer has the right of first discussion
with respect to our product portfolio, and no longer has a right of first refusal to acquire us. In connection with this termination agreement, we agreed to reimburse Abbott for development work they
completed on our behalf totaling $1.6 million. This amount was included in Accounts payable and accrued liabilities at December 31, 2001.

In
December 1999, we also entered into a Nipent distribution agreement with Abbott, which is still in effect. Beginning March 1, 2000, Abbott became the exclusive U.S.
distributor of Nipent for a period of five years. We retain U.S. marketing rights for Nipent. Under this agreement, Abbott made a $5 million cash payment to the Company. This amount was
included in deferred revenue and is being recognized as other revenue ratably over the term of the agreement. The unamortized balances of $3,167,000 and $4,167,000 are included in current and
non-current deferred revenue at December 31, 2001 and 2000, respectively.

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---

7.    Related Party Transactions

EuroGen Pharmaceuticals Ltd.

In September 2001, we entered into a Supply and Distribution Agreement with EuroGen Pharmaceuticals Ltd. ("EuroGen"), a company incorporated and
registered in England and Wales. Under the agreement, we granted EuroGen the exclusive European and South African rights to promote and sell certain of our existing generic and other products or
compounds. The agreement also establishes a process for granting EuroGen rights to sell additional products in Europe and South Africa, subject to our compliance with our other existing licensing and
distribution arrangements. After complying with these existing obligations, we will be required to offer EuroGen the option to obtain European and South African rights to our future products. EuroGen
will seek and pay for all necessary regulatory approvals and authorizations necessary for the commercial sale of the products in the territories where they market and sell the products.

At
December 31, 2001 we had loaned EuroGen $260,000 under a line of credit arrangement designed to cover start-up expenses. This amount is included in Due from related
parties on the balance sheet. If EuroGen is unable to adequately fund its operations, we may not recover amounts owed to us or realize any income or benefit from the relationship.

KineMed, Inc.

In November 2001, we made an equity investment of $150,000 to acquire 100,000 shares of Series A Convertible Preferred stock of
KineMed, Inc., a start-up biotech company. The president and chief executive officer of KineMed is a former director of SuperGen. The president and chief executive officer of
SuperGen is a member of the Board of Directors of Kinemed. We have accounted for this investment under the cost method as our ownership is less than 20% of KineMed's outstanding shares. This
investment is included on the balance sheet in Investment in stock of related parties.

AVI BioPharma, Inc.

In December 1999, we entered into an agreement with AVI BioPharma, Inc. ("AVI"). The chief executive officer of AVI is a member of our Board of
Directors. The president and chief executive officer of SuperGen is a member of the Board of Directors of AVI. Under the terms of the agreement, we acquired one million shares of AVI common
stock, which amounted to approximately seven and one half percent (7.5%) of AVI's outstanding common stock, for $2.5 million cash and 100,000 shares of our common stock at $28.25 per share. We
also acquired exclusive negotiating rights for the United States market for Avicine, AVI's proprietary cancer vaccine currently in late-stage clinical testing against a variety of solid
tumors. Avicine is a non-toxic immunotherapy that neutralizes the effect of a tumor-associated antigen on cancer cells, while stimulating the body's immune system to react against the
foreign tumor.

In
July 2000, we finalized an agreement with AVI to obtain the U.S. marketing rights for Avicine. We issued 347,826 shares of our common stock along with $5 million in cash
to AVI as payment for our investment, in exchange for 1,684,211 shares of AVI common stock. As part of this agreement, we obtained the right of first discussion to all of AVI's oncology compounds and
an option to acquire an additional 10% of AVI's common stock for $35.625 per share. This option is exercisable for a three-year period commencing on the earlier of the date the FDA accepts
the NDA submitted for Avicine or the date on which the closing price of AVI's common stock exceeds the option exercise price. We have accounted for the investment in AVI under the cost method as our
ownership is less

F-20

---

than 20% of AVI's outstanding shares and is classified as available-for-sale. No value has been ascribed to the option as neither of the measurements have been achieved as of
December 31, 2001.

Avicine
will require significant additional expenditures to complete the clinical development necessary to gain marketing approval from the FDA and equivalent foreign regulatory
agencies. As part of this agreement, we are obligated to make additional payments to AVI based on successful achievement of developmental, regulatory approval, and commercialization milestones over
the next several years that could total $80 million. In 2001, we recorded $1.2 million in research and development expenses relating to our share of the development costs for Avicine. At
December 31, 2001, this amount had not been paid to AVI and is presented on the balance sheet as Payable to AVI BioPharma, Inc.

AMUR Pharmaceuticals, Inc.

Two SuperGen directors were formerly directors of AMUR Pharmaceuticals, Inc., a privately-held company conducting research and development work
partially funded by SuperGen. The president of Amur performed consulting services for SuperGen and was paid $180,000 in 2001, $152,000 in 2000 and $68,000 in 1999 for these consulting services. In
addition, in September 1999 this individual was granted an option to purchase 5,000 shares of SuperGen stock. Using the Black-Scholes option valuation model, this option was valued at $44,000
and amortized to expense over one year.

In
September 2000, we acquired all of the intellectual property of Amur in exchange for 37,795 shares of our common stock and two-year warrants to purchase 200,000
shares of our common stock at $40.00 per share (see Note 5).

Quark Biotech, Inc.

Two SuperGen director/stockholders are directors and stockholders of Quark Biotech, Inc. ("QBI"), a privately-held development stage
biotechnology company headquartered in Israel. In June 1997, we made an equity investment of $500,000 in QBI's preferred stock, which represents less than 1% of the company's outstanding shares
as of December 31, 2001. Our investment in QBI is carried at cost and is included in "Investment in stock of related parties." In November 1997, we leased approximately
one-third of the laboratory square footage at the SuperGen Pharmaceutical Research Institute ("SPRI") to QBI for $3,000 per month for three years, plus its pro-rata share of
specified common expenses. We also completed certain building and laboratory improvements and purchased furniture on behalf of QBI for a total of approximately $750,000, of which $300,000 was
reimbursed by QBI in 1997. In the first quarter of 2000, we terminated the lease with QBI and we took possession of the entire laboratory space and related property, plant, and equipment at SPRI.

Other

In March 1999, we entered into a promissory note with Tako, whereby Tako agreed to advance us up to $5,000,000 through December 31, 1999. Advances
under this agreement would be secured by substantially all our assets. In connection with this transaction, we issued Tako a five-year warrant to acquire 500,000 shares of unregistered
common stock at an exercise price of $11.00 per share. We calculated the value of the warrant at $2,000,000 using the Black-Scholes valuation model. In September 1999, we terminated this
promissory note thereby releasing any security interest that Tako had in our assets. The value of the warrant was charged to expense in 1999.

F-21

---

At
December 31, 2001, we owned 10% of a privately-held company performing research and development work almost exclusively for SuperGen as well as selling SuperGen
certain research supplies. We paid this company $360,000 in 2001, $360,000 in 2000, and $448,000 in 1999 for services and supplies. We carry our investment in this company at no value.

8.    Commitments and Contingencies

We lease our primary administrative facility under a 10 year non-cancellable operating lease, which may be renewed for an additional
five-year period. The terms of the lease require us to establish and maintain two irrevocable and unconditional letters of credit to secure our obligations under the lease. The financial
institution issuing the letters of credit requires us to collateralize our potential obligations under the lease by assigning to the institution approximately $3.2 million in certificates of
deposit. The certificates of deposit are included in the balance sheet under "Restricted cash." Upon achievement of certain milestones and the passage of time, the amounts of the letters of credit are
subject to reduction or elimination.

We
are also leasing additional office space in a building adjacent to our laboratory facility under two leases which both terminate in 2006. Half of the space has been subleased under a
non-cancellable lease terminating at the same time as our master lease. The other half of the space has been subleased through June 2002.

Future
minimum rentals and sublease income under all operating leases with terms greater than one year are as follows (in thousands):

Year ending December 31,

Minimum
rental
obligations

Sublease
income2002

$
2,129

$
2312003


2,204


1642004


2,266


1712005


2,326


1772006 and thereafter


10,920


91$
19,845

$
834


Rent
expense, was $2,090,000 in 2001, $481,000 in 2000, and $283,000 in 1999. These amounts were net of sublease income of $237,000 in 2001 and $110,000 in 2000. We received no sublease
income in 1999.

We
have entered into technology license agreements allowing us access to certain technologies. These agreements generally require royalty payments based upon the sale of approved
products incorporating the technology under license. No sales of such products have occurred as of December 31, 2001.

We
have also entered into manufacturing and service agreements for certain manufacturing services, the supply of research materials and the performance of specified research studies.
These agreements require payments based upon the performance of the manufacturing entity, delivery of the research materials or the completion of the studies. No such payments were required as of
December 31, 2001.

F-22

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9.    Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):

December 31,2001

2000Net operating loss carryforwards

$
65,751

$
47,445Purchased in-process technology


2,219


2,222Research and development credit carryforwards


5,168


2,892Capitalized research and development


8,281


6,689Other


1,740


1,992Total deferred tax assets


83,159


61,240Valuation allowance


(83,159
)

(61,240
)Net deferred tax assets

$


$



Realization
of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully
offset by a valuation allowance. The valuation allowance increased by $21,919,000 during 2001 and $18,860,000 during 2000.

As
of December 31, 2001 we have net operating loss carryforwards for federal income tax purposes of approximately $188,000,000 which expire in the years 2005 through 2021. At
December 31, 2001, we had federal research and development credit carryforwards of approximately $3,400,000, which expire in the years 2007 through 2021.

Utilization
of our net operating loss carryforwards may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code and similar
state provisions. Such an annual limitation could result in the expiration of the net operating losses before utilization.

10.    Employee Benefit Plans

We have adopted a 401(k) Profit Sharing Plan (the "401(k) Plan") for all eligible employees with over six months of service. We may be obligated to make
contributions to the plan to comply with statutory requirements. Voluntary employee contributions to the 401(k) Plan may be matched 50% by the Company, up to 3% of each participant's annual
compensation. Our expense relating to contributions made to employee accounts under the 401(k) Plan was approximately $294,000 in 2001, $144,000 in 2000, and $120,000 in 1999.

In
1998 we established the 1998 Employee Stock Purchase Plan ("ESPP") and reserved 100,000 shares of Common Stock for issuance thereunder. The number of shares reserved under the plan
was increased by 200,000 in 2001. Employees participating in the ESPP are granted the right to purchase shares of common stock at a price per share that is the lower of 85% of the fair market value of
a share of Common Stock on the first day of an offering period, or 85% of the fair market value of a share of Common Stock on the last day of that offering period.

In
2001, we issued 16,936 and 22,650 shares through the ESPP at $10.07 and $8.71, respectively. In 2000, we issued 8,554 and 12,150 shares through the ESPP at $24.17 and $16.74,
respectively. In 1999,

F-23

---

we issued 9,022 and 14,173 shares through the ESPP at $15.19 and $6.38, respectively. As of December 31, 2001, 200,384 shares are reserved for future issuance under the ESPP.

11.    Quarterly Financial Data (Unaudited)

Following is a summary of the quarterly results of operations for the years ended December 31, 2001 and 2000:

|                                      |  | Quarter Ended |        
|------------------------------------- |  | ------------- | -------
|
|
|2001                                  |  |               |        
|Net sales                             |  | $             | 1,557  
|Cost of sales                         |  |               | 362    
|Net loss                              |  |               | (12,968
|Basic and diluted net loss per share. |  |               | (0.39  
|2000                                  |  |               |        
|Net sales                             |  | $             | 695    
|Cost of sales                         |  |               | 124    
|Net loss                              |  |               | (7,539 
|Basic and diluted net loss per share. |  |               | (0.27  

F-24

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 1st day of April, 2001.

| |  | SUPERGEN, INC.
| |  | --------------
| |  | By:           

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each such person whose signature appears below constitutes and appoints Joseph Rubinfeld his
attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

|Signature                               |  | Title                                                                                           |  | Date         
|--------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | -------------
|                                        |  |                                                                                                 |  |              
|/s/JOSEPH RUBINFELD(Joseph Rubinfeld)   |  | Chief Executive Officer, President and Director (Principal Executive Officer)                   |  | April 1, 2002
|/s/EDWARD L. JACOBS(Edward L. Jacobs)   |  | Chief Business Officer and Chief Financial Officer (Principal Financial and Accounting Officer) |  | April 1, 2002
|/s/DENIS BURGER(Denis Burger)           |  | Director                                                                                        |  | April 1, 2002
|/s/THOMAS V. GIRARDI(Thomas V. Girardi) |  | Director                                                                                        |  | April 1, 2002
|/s/WALTER J. LACK(Walter J. Lack)       |  | Director                                                                                        |  | April 1, 2002
|/s/JAMES S.J. MANUSO(James S.J. Manuso) |  | Director                                                                                        |  | April 1, 2002
|/s/DANIEL ZURR(Daniel Zurr)             |  | Director                                                                                        |  | April 1, 2002

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